Why Would Someone Sell a Business That’s Profitable?

by Vanessa Lovie 20th of September, 2022

Why Would Someone Sell a Business That’s Profitable?

When I first started writing this article, I had to laugh, the obvious answer is… because it is the best time to sell a business!

You want to sell a business when it is profitable and making good money - that is when you will get the best value and make the most money from the sale. But there is more to it than that, as owners rarely decide to sell a business when at its peak performance - why would you? You can reap those rewards as the owner.

So, we take a look at 4 reasons someone may sell a business that is profitable.

1. To Make Money

Well, this is the most obvious. Business brokers always advise owners that the best time to sell a business is when it is in a steady growth period and making good money. Where talking about good net profit and good income for the owner (not just the turnover!).

“Your business is an asset that you can sell one day and make money out of, and yes you have to look at it that way, you have to build value in your business. The more time you spend preparing the business for sale, the better the outcome and the better the value you’ll fetch from the market. It’s an 80/20, 80% time in preparation and 20% time in selling.” Shweta Tripathi, Accelerate Business and Franchise Sales

A business is essentially an asset. Though owners don't always view it this way, as they tend to get very attached to the growth and success of their business, they often forget it is an asset that can be sold. That it does have value today, just like the day the owners want to exit it.

If a business is profitable and making good money, it is the absolute best time to sell. Maybe there is some additional work to ensure all the systems are up to date, the owner is ready to step out of the business and that it is actually sales-ready. But the most important box, that the business is profitable is ticked, then the owner is in a very good position to sell a business and make money.

2. To Move On

Business owners love a challenge. The notion of seeing problems and finding solutions is at the core of most owners' mindsets. When a business is doing well and is profitable, an owner can see the opportunity for change. They are faced with a few options such as; placing the business under the management and stepping back, selling the business and moving on to another venture, or keep going.

Back in the day, owners used to hold onto businesses for 20, or 30 years. Well-established strong businesses would pass from one generation to the next. Today, there are a lot of entrepreneurs. They see the business as an asset, and much less as part of their identity or who they are, they are an entrepreneur.

The goal of an entrepreneur is to build a business, make it successful then move on to their next venture. One of the ways they can successfully move on is to sell a business and buy or start another.

3. Retirement

Baby boomers' retirement is a hot topic. It is expected that 120,000+ people will retire every year, over the next 10 years that's 1.2 million plus baby boomers retiring from the workforce.

“The number of Australians being added to the 65+ cohort every year will rise during this post-pandemic decade passing 126,000 in 2021, peaking at 137,000 in 2026, before subsiding to 105,000 in 2030. This surge in the retiree population is caused, of course, by the great baby boom of the 1950s.” Bernard Salt

That is a lot of expert knowledge and of course business owners who will be leaving the workforce and retiring. A lot of owners hope that their business will pass on to the next generation, unfortunately, the statistics show only a third of all businesses will pass on to their children, which means the baby boomer generation will need to sell a business.

4. Relocation

People don't live in the same area forever. Personal circumstances can drive families to move to a new location and taking the business with them may be difficult. Depending on the type of business, the owner may be able to retain some control, manage remotely or relocate the business.

Other times, it is a better decision to sell a business that is profitable and look to buy or start a business in the area they are moving to. They may be looking at a city such as businesses for sale in Sydney or a regional area such as businesses for sale in Cairns. Australia is a beautiful country with so many beachside, country or city locations to live.

A profitable business is one that is making a good net profit. After balancing your income and expenses, paying any debts and taxes, there is money left over in the business. That is the profit, that is what buyers will look at when considering an opportunity. That is often what is used to value a business (among many other factors).

If you want to sell a business that is profitable than you are in a good position to make money. You should obtain advice from professionals such as business brokers, accountants and solicitors to ensure the sales process is smooth.

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Tags: profit exit strategies selling