It can be truly agonizing when you face the decision of whether or not to sell your business, but the agony of this question can be compounded if your decision to sell comes at the same time as a major growth decision.
What if your business is at a turning point where growth has to happen? Should you invest the capital in a business you are seriously considering selling, or should you pass the buck to the new owner? Here are a few things to consider when trying to make this choice:
Are you growing the business and investing the capital to service already existing customers with a model you have already used and proven?
An example here might help. Say you have a small dress shop, and some of the dresses you make in your in-house manufacturing facility are sold at local boutiques. One of the boutiques has recently expanded the amount of your dresses that they will carry due to high demand, and they would like to have you fill much larger orders for them on a regular basis. This increase in orders would mean that you have to expand the manufacturing part of your business substantially, likely by opening a second location.
In this situation, it is probably best to spend the capital and invest in the new manufacturing, then sell the business later. You are going to be serving an already existing customer (the boutique) using and already proven model (your dresses in high demand).
Are your ideas for growth dependent on new customer acquisition and retention using a new and unproven model?
Here’s another example to illustrate this point. This time you own a bakery, and since your sales have been a bit stagnant you have decided that you want to open a second small location in a newly revitalized part of the city.
In this situation, it would likely be best to sell the bakery as-is and let the new owner try out the second location. The new bakery location will require a new customer base and a new (and unproven) location.
Do the answers to these questions apply to every case? No, absolutely not. Businesses are very complex, and as such, every business is different in its needs for the future. Have a talk with an experienced and qualified business broker about whether or not the market will respond to your future investment in the business. It may be better to sell now if the market won’t give you back what you’ve invested.
Are you a seller stuck in the “to sell or not to sell” game? Do you have questions about whether or not your future plans will pay off in a sale? Please feel free to leave us a question or comment here, and we will be happy to help.
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