July 2015 Articles

Why Owners Choose Not To Sell

Friday, July 31st, 2015

Presented by T. Ray Phillips

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

They still have enough fire in the belly to fuel their investment of time and energy in the business. 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.

If one (or more) of these concerns resonates with you, let’s meet to assess them.

DISCLAIMER: The information contained in this article is general in nature and is not legal advice. For information regarding your particular situation, contact an attorney or tax advisor. This newsletter is believed to provide accurate and authoritative information related to the subject matter. The accuracy of the information is not guaranteed and is provided with the understanding that none of the providers of this newsletter, including Business Enterprise Institute, Inc., is rendering legal, accounting or tax advice. In specific cases, clients should consult their legal, accounting or tax advisors.

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Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS under circular 230, we inform you that any U.S. Federal tax advice contained in this communication, unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another party any matters addressed herein.

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

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