Why Do Owners Really Agree to Sell?

How many of you would say your most recent hire agreed to join your organization purely for financial reasons? Most employees take other factors into consideration including benefits, location, job description, your company’s mission, and “fit” with your company’s culture. The financial side is certainly important, but leveraging these other factors is critical, especially when convincing someone who is already employed to join your company.

Acquisition, especially not-for-sale acquisition, often works in the same way. Convincing an owner to sell a not-for-sale company involves more than handing over a big chunk of cash. We call this finding out the seller’s equation – what motivators will persuade them to sell their company and sell it to you. Here are 5 reasons why sellers say “yes” to acquisition.

  1. Family – Often if the owner has no suitable heir in place or succession plan, he or she will be more open to selling rather than passing the company on to the next generation. Other owners may also wish to spend more time with their family and seek to exit the business through a sale.
  2. Age – While there is no magic age at which an owner will sell, it can be a contributing factor. An older owner may wish to retire while a younger, serial entrepreneur may wish to cash out and move onto the next adventure. Starting and running a company as a sole entrepreneur can be exhausting and many owners experience burnout.
  3. Risk – Selling can provide liquidity and reduce the owner’s level of risk. A larger company can provide security and reduce the owner’s personal liability, by taking on some of the administrative associated with owning a company like payroll, insurance, and other paperwork.
  4. Excitement – For some, having their business acquired is a mark of success. Don’t underestimate the power of prestige and appearance in motivating an owner to sell.
  5. Shared vision – One of the best ways to persuade an owner to sell is for a buyer to establish a relationship with seller and communicate a shared vison for long-term. Many company owners are both financially and personally invested in their companies and will feel more comfortable selling their “baby” to someone who also values their business.

As a buyer, don’t forget to take into account the five factors listed above as well as the financial aspect of doing a deal. By combining financial and nonfinancial issues you have a great chance at convincing the owner to sell and building a deal that makes sense for both sides.

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