3 questions to ask yourself before selling your business
Thinking of selling your business? Consider these three points before doing so.
One of the hardest decisions you'll ever have to make as a founder is whether you should sell your business. Deciding if you should keep growing your company and try to turn it into a behemoth or sell it and receive a large payout for your efforts is no small decision.
There are many factors that should be considered on whether to sell or not. For example, are you still motivated to run and grow your business? Is there too much risk associated with keeping the business? Do you know what you will do post-sale?
If you're set on selling your business, do you need it to be sold right away, or do you not mind waiting for the right offer? Different businesses can take various amounts of time to sell. Some studies show that the sale of a business can take up to 6 months, but the timeline all depends on your business model and current economic conditions.
Although there are many things to consider before selling your business, below are the three things I believe are most important to consider before making your decision.
Do you have a solid chance of becoming the leader in your market?
If the answer to this question is yes, you should likely hold onto your business. This is because no business will be able to afford how much you are potentially worth.
Facebook is an excellent example of this. Before Facebook became the massive platform that it is today, it turned down over 11 buyout offers. These were no small offers either. For instance, Mark Zuckerberg turned down an offer from Viacom for $1.5 billion in 2006.
However, given the size of Facebook's market and how little competition they had, it made no sense for Zuckerberg to go through with the offer. If you find yourself in a blue ocean with virtually no competition, your sole focus should be scaling your business, not trying to sell it.
How risk-tolerant are you?
As many founders know, starting a business entails a large amount of risk. Inevitably, the larger your business grows, the more risk you can face. The larger you grow, the more competition is likely to enter your market. On top of that, as your business grows, you will need more employees to handle your business operations and there will be more compliance work that will need handling.
If you find that you have restless nights, constantly wondering if your business can keep up its momentum, then maybe it is time to sell your business. There's no shame in reaping your rewards and getting out while you still have all your hair.
Do you know what you will do next?
There isn't much conversation around the emotional fallout you face after selling your business. However, many founders who have sold their business feel that they have lost their purpose. Many founders connect their identity with their business, and when they sell their business, it is almost like selling a piece of themselves.
As a founder, you need to prepare for the emotional journey that comes after the sale of your business. Before finalizing the sale of your business, you should know what you're going to do next. What's going to motivate you? What's going to give you purpose?
The money will be great, and I'm sure you'll enjoy it for a few months, but afterward, you're going to be looking for something to reinvigorate you. Therefore, you should always think about your next venture before you part ways with your current business.
You have plans. We have ideas. Connect with a First Midwest Bank Small Business Banker today.