Selling a company: Advantages and disadvantages
Given the rapid global events and turbulent financial climate, it is not surprising that more and more owners are considering selling their businesses.
If you decide to sell your company, you first need to prepare it properly: all financial reports, accounts, and references should be in order and ideally, the company should be profitable. However, if your business is profitable and you have no other viable reason – why would you want to sell it? In one word – risk.
Whatever your reason, here is a list of some selling business benefits and disadvantages that may help you decide to sell your business.
Pros and cons of selling a business
Advantages of selling business
– If you sell your business in good condition and under favorable conditions – you can get a great price for it. You can sell at a profit and gain financial freedom by making money on your sale.
– If you have debts, you will cover them by selling your business with Websiteclosers – visit the site.
– By selling your company, you inevitably free up time and ultimately money for other projects. Selling a business allows you to invest in new businesses or buy a new company.
– You will have more time for yourself or your loved ones.
– If your most valuable asset is equity, selling a business allows you to partially or completely liquidate it and diversify your investments.
Disadvantages of selling a business
– The sale process itself takes a lot of time and sometimes money.
– Certain aspects of the transaction may take away your ability to open new companies in your niche.
– You may lose good contact with your employees.
– If the company is profitable, you lose capital.
Think carefully about selling your business. Be sure to consult with family and friends – and of course your lawyer and accountant – before making this important decision.
So how to understand when to sell business?
Any project lives in a certain cycle: it is impossible to endlessly increase the value of the product without changing the business model, especially in the technology sector. The stage of multiple growths, even if it lasts 3-5 years, will be followed by a slowdown, and then stagnation and decline. This is a natural process. If you do not want to leave the market, remember: business is constantly changing. And if you do not manage them, you can not think that the company will not lose value. Business should be sold when it is at the post-peak stage: the project has already reached its maximum performance and is especially interesting to buyers. If at this moment you get a lucrative offer on the table, keep in mind that it will not stay there forever.
You need to sell the company to those who will help it develop further. This is a win-win-win deal: you win as the founder of the company, your business wins, which will live a new life, and the partner wins, who gets a successful product in his system.
Remember: selling the business is not the main goal
After receiving the offer, give yourself time to think. Look as honestly as possible at the business plan and the future of the company and ask yourself: can the business achieve something more and how is this confirmed by its history? You need to reject fantasies and decide whether you are able to continue to maintain the current growth rate, generate the same margin, and not just believe that it will miraculously double.
It is important to understand who else can buy your company, what their interest is, how much they can pay for the business, and how much current annual income this deal will bring.
The emotional side should also be taken into account. Does what you do ignite you, do you see the potential and opportunity to earn? If you have lost interest in your business, it will be very difficult to build something more within it.
Finally, you need to decide what to do after selling the company. Some owners cannot exit the project simply because they do not know the answer to this question. And they are afraid to lose money: it seems that once there is a business, there will always be income – unlike a one-time, albeit large amount.
Conclusions
There is no universal advice that will tell you whether to sell your business. But the very possibility of such a sale is always related to the value you represent to the market. Financial indicators are a consequence, they can stay normal for some time. But if you stop giving the market value, you will either have to change or get ready to leave.
The most important thing is not to get upset, because there are a lot of benefits of selling online business. Sometimes people abandon their business simply because they receive a profitable offer. If the market is volatile and the hype around your industry creates a profitable opportunity, you should take advantage of it. In 2012, the creators of Instagram sold their app to Facebook for $1 billion. The likely capitalization of Instagram today (if we consider it as a separate company from Facebook) is approximately $100 billion. Given the many-fold increase in the value of the app, selling it now may seem like a bargain. But it is unknown whether Instagram could have grown to such a size if it had remained in the hands of its original creators. As in any other case, it is important to remain realistic and pragmatic in such situations. Even if your company is capable of generating billions in the long run, it requires a lot of resources that you may not have. Therefore, if some big player offers a lucrative offer to buy your business, then in many cases it is worth accepting.
