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At Quiet Light Brokerage, I’ve seen people sell (or try to sell) their businesses for reasons that range from bad to totally dishonest. If you are considering selling your online business, first ask yourself, is selling really your best option? Sometimes, there are other better options.
It Is Usually Better To Own Your Business
It may seem odd for a website broker to discourage business owners from selling their company. It might mean I no longer have a job!
That said, I think it is obvious it is better to own a business than to sell it. Most business owners understand this, especially if the business is profitable and gaining traction.
Regardless of the reason that is making you consider selling, be sure to examine other options first.
Bad Reason #1: I’m Simply Burnt Out
This is the most common reason people sell their businesses. As entrepreneurs, we typically suffer from shiny penny syndrome. This makes us always want to look for the next adventure, the next project, or the next startup.
Why This May be a Bad Reason for Selling
Make no mistake: burnout is something you should take very seriously. Burnout is often followed by declining revenues and a stagnating business.
But there are other options to treat burnout.
Option 1. Take Yourself Out Of The Business
Most entrepreneurs have a difficult time creating a business that doesn’t revolve around them.Click to tweet
The constant need to wear multiple hats is what often leads to burnout.
Scott Fritz, author of The 40 Hour Work Year, believed he was the crucial cog that made his business run. But due to certain circumstances (I won’t spoil the book), Scott managed to build processes and hire people which essentially made his involvement miniscule.
The result? A profitable business which no longer required his blood, sweat, and tears.
Option 2. Throw Yourself Into a New Discipline Within Your Business
This is a strategy I’ve personally used with Quiet Light Brokerage. After personally playing the role of broker for hundreds of deals, I began to grow tired of doing deals.
Rather than sell Quiet Light Brokerage, I decided to change my focus into other parts of the business. It’s important to note I had brokers I knew and trusted who would do a great job. So I fed them as much business as I could, while I jumped into an entirely different aspect of the business.
I got a much needed break and the business grew significantly.
Why This Might Be a Good Reason to Sell
As I said above, burnout is certainly a situation you need to be aware of. If you are so burnt out that you do not have the desire to build systems, hire people, or jump into another part of the business, then it makes sense to sell.
The risk you run in not selling is a sudden decrease in business which will lower the value of the company.
Bad Reason #2: Competition is Getting Too Strong
This reason actually has elements of sanity in it. Competition is a factor that can have a real negative impact on your business. If you do decide to sell your business, it is something a prospective buyer will also be highly interested in investigating.
But if you think you should sell just because the competition is getting too strong, you should think again.
Entrepreneurs Are Prone To Paranoia & Mood Swings
Every entrepreneur identifies with this image. Like it or not, most of us are prone to mood swings and paranoia. This isn’t necessarily a bad thing – in fact it helps us succeed.
But when we see the competition becoming successful, it can often bring us to one of those low points on the graph.
Before You Decide To Sell
If you feel the competition is outpacing your business, take a moment to do a SWOT analysis on your company. This will identify the fact your business still has strengths and opportunities.
The reality of any industry is that there is going to be competition. If you’ve built a successful business in that industry, you will have the tools to compete. This may require some changes, or it may simply require some re-branding in a sub-niche.
Bad Reason #3: My Business Is Tanking
Do your revenues look something like this?
If so, you are probably frustrated.
Obviously, month-over-month declines in revenue are extremely discouraging. It is why many entrepreneurs come to us hoping to cash out with whatever value they have left.
Why Selling Is a Bad Idea
The two charts below show two monthly earnings trends. One is growing, the other is declining:
Which business do you think is the most valuable?
I’m sure you would say the business with growing revenues (and you would be correct). But there is more here than just a trend: the earnings are exactly the same in both graphs.
The charts are simply reversed. And yet, the business with declining earnings is worth significantly less than the business with growing earnings!
If you sell when you have declining revenues, you are literally ‘buying high and selling low’.
Your Alternative To Selling
Fix the business first! Do whatever you can to reverse, or at least stabilize, the downward trend.
Of course, this is easier said than done. But the worst thing you can do in this situation is to get frustrated, throw your hands in the air, and sell at your business’s lowest valuation point.
But If You Can’t Fix It…
Then it may be worth considering a sale. After all, with each passing month, the value of your business is only going to get worse.
However, you first need to examine why you can’t fix the negative trend in your business. If it is a direct result of your industry becoming outdated or losing traction, then you could be in the next situation.
Bad Reason #4: Something Is Happening Which Will Negatively Impact My Business
When Quiet Light Brokerage first started, I remember a period of roughly 3 months where we received a huge influx of requests to sell from people who owned MySpace Wallpaper websites.
A few years later, I saw the same phenomena with powered mini-bikes. And this unusual grouping of sale requests popped up again later with e-cigarette stores.
All of these business owners knew that their business was soon to be irrelevant (except for e-cigarettes – there was just a threat at the time).
Selling your business because you know it is not viable is not a good reason to sell. The reasons for this should be obvious. Not only would selling a business like this require some level of dishonesty, but it could also lead to a possible lawsuit.
Bad Reason #5: My Industry Isn’t So Popular
In the situations above for the mini-bike and e-cigarette businesses, those business owners knew there was a strong possibility their stores would soon become illegal.
But for many industries, such as the MySpace wallpaper websites, these business owners saw the writing on the wall. They knew their niche was losing traction.
In this situation, selling is not necessarily a bad idea as long as you understand you will likely take a financial hit in your valuation. But you will probably financially benefit more by simply letting the business tail off with the rest of the industry over time.
To help figure out what to do, read about whether to sell or hold onto your declining business.
What Are Good Reasons To Sell a Business?
It may seem like there are no good reasons to sell a business at all. But that is not the case. There are plenty of good, valid reasons.
- Planning. Rather than wait until you are burnt out (which gives a buyer leverage), many sellers spend a few years planning their exit, optimizing their businesses, and exiting while they still have the ability to retain ownership if they don’t get the deal they want.
- Retirement. Taking the time to plan for retirement is a very understandable reason for selling your business. Once again, by planning for your sale, you can maximize the value you get.
- Life changes. We work so we may live, not the opposite. So when life changes pop up, sometimes it also requires a change in business direction. But explore the option first of hiring people to run the business for you.
- When the business no longer aligns with your goals. Some people have no desire to run a company they aren’t directly involved in. Others may enjoy the startup, but then hate the process of running an established business. We all have individual goals and desires. When your business no longer fits those goals and desires, it could be a good time to sell.
Whatever You Decide, Consider All of Your Options First
Deciding to sell your business is a very personal decision. Despite the opinions above, no one can really tell you when you should or should not sell.
If you have explored your options, and are set on selling, we are more than happy to help.
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