Understanding a business seller’s motivations
Rapid changes in technologies, markets, and economic conditions complicate your quest to find deals that will meet measurable strategic objectives over the next 3 to 5 years. But some things change more slowly. For example, the top reasons print business owners sell their businesses seldom change from year to year.
For a 2018 Print + Promo magazine article “Everything You Need to Know about The M&A Landscape,” Brendan Menapace interviewed me about some reasons print business owners choose to sell their business and how they can prepare for the process.
Several reasons cited in that article still hold true today. But there are many additional reasons you should be aware of. Knowing why a seller feels motivated to sell can influence your decision to buy. Here are eleven common reasons business owners sell their companies.
1. They are ready to retire.
Time takes its toll on everyone. An enthusiastic, high-energy business leader who thrived on new challenges in his 40s may feel differently about the business in his 60s and 70s. Some business owners reach their mid-60s before realizing they never developed a good succession plan.
2.They want to focus more time on sales.
Smaller companies often hit a growth plateau and have a hard time taking sales to the next level. When a printing firm is rolled up into a larger company, the former owner can focus more effort on growing the business and less time on routine administrative matters.
3.They lack the capital to buy new technologies.
The adoption of faster, more versatile digital printing and converting technologies has created changes in how customers buy print. Today, all types and sizes of printing businesses must be prepared to manage a high volume of shorter run jobs. Failure to meet the customer’s expectations for ultra-short turn times can be costly.
To remain profitable, print business owners must make ongoing investments in workflow automation and faster, industrial-grade digital printing equipment that can handle both short and mid-volume runs. Some business owners hesitate to make the big investments if they aren’t fully committed to running the business for another 5 years or so.
4.They experience burnout.
Chronic, work-related stress leads to exhaustion, loss of energy, and a mental separation from the job. Business owners experience burnout when they refuse to take vacation for years on end.
5.They get an offer they can’t refuse.
Some business owners get so wrapped up in the day-to-day success of their business, they don’t even think about selling it until someone makes them an offer. If the offer is appealing, most will definitely consider it.
6.They get an opportunity (or urge) to try something else.
Owners who started businesses can get bored once the business has reached a point where the owner doesn’t need to be present every day. Maybe the owner has been approached about spearheading a startup business. Or perhaps the owner wants to chart a new course in a different field.
7. The business experiences declining revenues.
The pandemic year of 2020 reminded every business owner that economic conditions can go from rosy to wretched in a matter of days. Reversing revenue declines requires bold, strategic actions by a fully engaged business leader.
8. Disputes between partners undermine operations.
Many businesses flourish under the guidance of two owners who have different (but complementary) temperaments. For example, one partner may be fiscally conservative and risk-averse, while the other partner is a creative visionary who favors thinking big and taking risks on expansion plans.
These partners may balance each other out for a while. But inevitably, disputes between the partners can bog down morale and operations. Like two people going through a divorce, the partners may decide it’s best just to sell the company and make fresh starts on their own.
9. Family obligations or health issues take precedence over the business.
None of us can predict when family issues of serious health conditions will limit the amount of time and energy we can devote to our jobs. The death of a spouse or the need to care for an aging parent may require one to readjust priorities.
10. The location has lost its appeal.
The characteristics of communities change over time. Businesses come and go. Educational institutions decline. Young people seek opportunities elsewhere. And new governments impose higher taxes and regulations while ignoring infrastructure improvements. A state or region that was a popular choice 30 years ago might have lost some of its luster. The business owner is ready to move somewhere else.
11. Changes within the industry drive down margins.
Owners who used emerging printing technologies to gain a competitive edge and earn high margins get discouraged as the technology matures and becomes more accessible. An influx of new competitors equipped with the same technologies causes prices and margins to drop. Running the business isn’t as rewarding as it once was; the thrill is gone.
Understanding the motivations and intentions of a seller is important. Share on XIt may change how you view the potential deal or how smoothly the process goes. A seller who is anxious to retire or make a lifestyle change will be happy to turn over the reins of a profitable, growing business. They will do what it takes to keep the deal moving forward.
Less motivated sellers who feel compelled to sell because of circumstances beyond their control may dither and procrastinate. They may not mind if a deal falls through because the decision to sell wasn’t entirely their own.
At LaManna Consulting Group, our team of experts educate business owners who want to become psychologically and emotionally ready for some of the challenges they may experience as they prepare their businesses for sale. We know you don’t want to waste time pursuing deals that may never come to fruition.
Call me at 561-543-2323 if you are seeking warm introductions to owners of middle-market businesses who are ready to sell.
RECOMMENDED READING
Mergers & Acquisitions: Crushing It as a Corporate Buyer in the Middle Market” (ISBN: 978-1735052205) by Rock Center Financial Partners