The reasons behind what motivates a business owner to decide to sell can be as varied and diverse as the ones that lead someone to put their home up for sale. While the decision can be very personal and there's no obligation to disclose the reason the business owner is selling, it can have some important significance to the new business owner.
In much the same way that a potential new homeowner would be interested in finding out if the seller is moving because they've outgrown the house or if it’s because it was built on swampland and is now slowly sinking, the prospective buyer of a business would want to know if the owner has decided to sell for personal reasons or if it's because of something in the business or in the marketplace that is prompting them to divest themselves of it.
It's impossible to compile a complete and comprehensive list of all the possible reasons that might compel a business owner to sell, but we can examine a few of the most common ones. The seller of the business you are considering will probably volunteer the reason they have decided to sell. When doing your due diligence, you can decide if the stated reason still rings true or if one of these possible reasons seems more likely.
Possible Reason The Business Owner Is Selling #1: Retirement
Owning and running a business is an act of passion for many people. It's what they love to do and hardly feels like work. Nevertheless, a time may come when they are either no longer physically capable of putting in the hours with the same kind of energy, or they simply choose it's time to hang their hat and hand the reins over to someone else. For many business owners, the company they have built represents a significant portion of their investments and assets. Therefore, the revenue from the sale of the business will be a welcome supplement to their retirement income.
Possible Reason The Business Owner Is Selling #2: Illness or Family Concerns
If a business owner or one of their loved ones is injured or diagnosed with a serious illness, running the business may become too much of a burden or of secondary importance, prompting them to put the business on the market.
If the business is owned by a married couple that is going through a divorce, selling it may be required as part of the settlement.
Reasons such as these should not too concerning if you want to buy a business unless growing acrimony between a married couple or the illness has negatively affected the business’ performance in the months leading up to the sale.
Possible Reason The Business Owner Is Selling #3: Burnout or Fatigue
Running a business can be stressful to some. Dealing with customers, negotiating with vendors, and managing the day-to-day routine can eventually become tiresome and lead an owner to decide to sell.
Some types of companies, like landscaping or construction, are also physically very demanding if the owner is also a worker in the business. Years of that kind of strenuous work can take a toll, and the owner may have decided that it's time for a break from it.
Possible Reason The Business Owner Is Selling #4: Lack of Vision and Inflexibility
When a person has spent years running a business a certain way, it's understandable that they might adopt an attitude that says, "this is how we've always done it, and it's how we're going to keep on doing it." While there may be a certain kind of comfort that comes from sticking with the familiar, a blind devotion to the status quo can eventually jeopardize the company if it will not adapt in the face of changing technology and consumer habits. Confronted by such circumstances, a business owner may prefer to sell rather than to change how the company operates.
Possible Reason The Business Owner Is Selling #5: Increasing Competition
Unless you’ve found a company that enjoys a monopoly in the marketplace, competition will forever be a reality that you must be aware of. However, if the competition is becoming fiercer and other companies are gaining a greater advantage, it may lead a business owner to decide to sell before it’s too late. That's why it's so important to do your due diligence when you're looking to buy a business and clearly understand the competitive landscape.If you're looking to buy a business in Minnesota, be sure to browse through the businesses for sale in our current listings.