10 Reasons to sell a business
Sectors are in constant dynamism such as new technologies (3D printing or big data), new forms of logistics and changes in the habits of consumers. These are a few examples of disruptions that cause the need to look ahead for the sale of one’s business.
A businessman must be aware of his environment, its causes and effects in respect to its business’s framework, to not be hindered. One must be ready to reinvent themselves if possible, or be ready to sell in case of an unfavorable outcome. Listed will be warning signs of when it is time to sell.
1. Concentration in the sector: mergers and acquisitions represent, in most cases, the least costly route to modify, globally, the structure of a sector. There will be a concentration of providers and competitors and your business will be left without any scale and your leeway will continue to be minimized.
2. The appearance of new economic players with greater competitive capacities that will threaten the future of your business. These players tend to be from different geographic markets or products. In these cases, selling the company while it continues to be relevant could be a wiser choice than waiting until your competitor takes over your clients and the market.
3. Declining profit, due to having little to no products that were developed or distinct. Having a scarce amount of development is a clear reason to reflect upon a sale. The business is suffering a progressive deterioration of its balance. Many times instead of creating profit one is diminishing it.
4. Growth, in some cases is precisely the problem. When a company takes on a larger size that was not foreseen, it creates a conflict with management because the company was not prepared for it. It is prefered to sell off to a larger business or one with greater management capacities.
5. The need to internationalize or relocate the business (so it can be competitive), puts the owner in a tough situation, causes the owner to sell the business before the decline becomes greater. The businessman sees how relevant competitors are relocating to different countries and he cannot do it himself.
6. The loss of human capital: if one is having trouble hiring, working together or keeping a team that is running the business, these are signs that it is time to sell your business. At this point, the owner does not have the will or strength to try and make the business grow at a rate that is of interest of other external directors.
7. The loss of important clients: this can be a sign that one is losing competitive strength or that the company is in need of new ideas or new strategies.
8. Clients are doing vertical integration: they are buying from our competitors and they stop buying from your business.
9. The need for the incorporation of new resources: if one finds themselves seeking an amplification of capital to continue to be competitive. It is possible that the businessman, especially if they are near the end of their career, is not willing to re-invest in the assets that they have already generated and extracted from the business and prefers to let go as a whole.
10. Detach from unprofitable divisions, to the ones that can no longer receive more resources, that do not fit in to the company’s competitive strategy or that needs to be sold to obtain liquidity and sustain the main business.
Upon the narrowing of margens that cause companies to be liquidated with foreign companies, that are more competitive, for cost, size or investigation capacity, development or innovation, many businesses end up needing formulas to reduce costs via productive synergies with other similar companies to obtain market cuotas sufficient enough to generate economic scales.
In the last years, the change in velocity has accelerated the need to be quick to identify the right time to detach yourself from the business. The key is in acting before it is too late. Act now and make the right decision, you may need help from experienced advisors. Don’t hesitate to contact us for a strategic advisory!