Motivations for Selling a Profitable Business in 2020

May 5, 2020

COVID-19 has provided us all with an opportunity to quietly reflect and strategically plan for the future.  Many entrepreneurs have used the time to assess systems, strategies, products, infrastructure, and personnel. Some have implemented changes. The building where our corporate office is located updated common area carpet and paint. A welcome improvement to our daily living environment.  Some entrepreneurs have decided after reflection that 2020 is the time to sell or start the wheels in motion to sell their businesses in 2021.

The following are some of the common motivations for clients who engage IBA to sell their privately held companies and family businesses:

Retirement – Over 70% of our annual clients retain IBA’s services to sell their businesses because they have reached an age or financial position where they wish to end the vocational component of their lives.  We welcome as experienced, professional intermediaries the opportunity to facilitate the sale of the ”lifework” of these individuals for a strong market value in a transaction employing “best practices”. Retirement sales have a high probability of being completed in “win-win” transactions because the proper motivation for a “good faith” negotiation exists on both sides of the table.

Change – The second most common reason entrepreneurs engage our professional services to sell their companies is because they are ready for change.  Change can be motivated by recognition they have taken a business as far as possible as a businessperson, because desire no longer exists to work on the project, or because an issue exists that the entrepreneur does not want to address.  COVID-19 has produced business sellers who fall in the latter two categories.  Some entrepreneurs as a result of being self-quarantined have come to the conclusion they no longer want to do what they were doing before the virus sent them home.  Execution on this epiphany can be putting a business up for sale.  Many business owners have been forced to make tough decisions related to staff, marketing, product development, and facilities due to the coronavirus. Common, forced decisions have been to burn through working capital and/or take out loans to weather the COVID-19 storm.  The decision to reinvest and rebuild a business after an external event that “rocked” your world can be daunting.  Some entrepreneurs are not willing to put more chips on the table to execute their vision or do what is necessary. This does not mean that the value of a business has dropped to zero.  The business may still have significant value in its present condition in the marketplace.  The sale of a company can offer the best outcome available for an entrepreneur that does not want to invest additional assets.  It is also a pathway to retiring debt and addressing accumulated liabilities.

Health – Short term or developing physical conditions can be a motivating force behind selling a business.  If these situations are known, it is best to move forward with a business sale as soon as possible, so the issue does not impact the executive management of the business or sale.

Death –  Every couple of years, IBA is asked to represent a spouse or the estate of an individual who died while still at the helm of a privately held company or family business.  IBA currently has one transaction in escrow tracking toward sale where we are representing the family of a deceased owner who died unexpectantly while running an award-winning business.

Partnership Breakup – Partnership breakups at a personal or business level can be the motivating force behind a business being sold.  The reasons for a breakup are commonly either a lack of shared common goals for the future or personalities that are no longer compatible. The first solution in any breakup of a partnership involving a business is for one of the partners to assume sole responsibility for executive management of the company and buy out the other party.  If this solution is not an option, conversion of the business asset into cash that can be divided easily is a good second alternative. A business sale is the best method for facilitation of this conversion process.

IBA, as the oldest business brokerage firm in the Pacific Northwest, has successfully facilitated business sales for clients motivated by the full spectrum of potential reasons.  If you are thinking about selling your business in 2020 or 2021, we would welcome the opportunity to learn about your company and provide an overview of our client services. 100% of IBA’s fees are payable upon performance at the completion of a transaction, so no cost will ever be incurred from having a conversation about a potential sale with us. All information shared will be held in strict confidence.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.