Why Owners Choose Not To Sell

by T. Ray Phillips - June 5th, 2012

Presented by T. Ray Phillips

Some owners make a choice not to sell their companies for very legitimate reasons. Among them are:

1. They still have enough fire in the belly to fuel their investment of time and energy in the business.
2. They are grooming interested family members or employees to one day assume the reins.

Some owners, however, have businesses that are prepared for sale, but hesitate. Why? These owners typically don’t sell when they should because: 1) they procrastinate; 2) they fear the unknown; or 3) they fear losing the known.

Procrastination

Procrastination on the part of an owner is not uncommon and has many causes.

* First, some owners just don’t know where or how to start planning an exit. If you are one of those owners, then reading the remainder of this article is a good start. The next step is to contact our offices to begin the process of creating an Exit Plan that allows you to cash out of your business and leave in style when you are ready to do so.
* Second, some owners think that they can always sell later. These owners overlook the demographic evidence indicating that when most Boomers reach retirement age, the glut of companies in the marketplace may drive prices down. Other owners in this group understand that the level of activity in the Mergers & Acquisition market can have a huge affect on the sale price of a company and their strategy is to wait until the market recovers.
* In the third group of procrastinating owners are those who believe that because they have “good” businesses, their exits require no significant planning. When they think about selling, they assume that there isn’t much for them to do because when the time is right, the right buyers will appear and pay them great prices for their companies.

It does happen, albeit quite rarely, that the right buyer appears and pays a great price for a great company. However, it makes more sense to prepare for the biggest financial transaction of your life than to entrust the success of your business exit to Lady Luck.

Fear of the Unknown

Owners who suffer from the fear of the unknown usually hold one (or more) of the following opinions:

* I don’t think the business is worth enough to satisfy my financial needs and objectives.
* If the employees discover I’m trying to sell, they will all quit.
* Because I’m indispensable to the company, I’ll be required to work years for a new owner and I don’t like working for anyone!
* The sale process will take too long and cost too much.

Fear of Losing the Known

On the other hand, the fear of losing the known is usually based on the following:

* The business has been my life—or at least it has given my life a great deal of meaning and focus; without it I may feel lost.
* The government will take too much in taxes. It is easier, less risky and more lucrative to stay, enjoy the cash flow and then leave getting paid over time.
* What will I do after I sell and leave the business? I don’t know what my life will look like if I leave.

Disclosure:
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor.

The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm. We appreciate your interest.

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

Securities, investment advisory and financial planning services offered through MML Investors Services, LLC 317-469-9999 Member SIPC Supervisory offices: 900 E. 96th St, Ste 300, Indianapolis, IN 46240. The Family Business Legacy Company, LLC is not an affiliate or subsidiary of MML Investors Services, LLC.

Copyright © 2016 Business Enterprise Institute, Inc., All rights reserved.

T. Ray Phillips, CFBS, AEP, ChFC
trphillips@financialguide.com

The Family Business Legacy Co, LLC
900 E 96th Street
Suite 300
Indianapolis, IN 46240
http://www.familybusinesslegacies.com
317-208-6312

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