When is it Acceptable to Sell a Company

Starting a business might just be the most challenging thing a person could ever do. People see entrepreneurs giving talks and going to meetings, and they think those people are living the good life. Truth is, it’s quite taxing and strenuous to run a company, and it does take a lot out of a person, no matter how experienced they are.


Unfortunately, contrary to popular belief, entrepreneurs don’t always make it, and not every company is going to be the next unicorn –– a new startup worth over a billion dollars. Sometimes, companies seize their operations, and they end up selling the business. But is that the only case when companies are sold, and when is it acceptable to do so?

You’ve grown too tired

No, companies don’t need to go bankrupt to be sold off. Sometimes, the business is actually doing quite well, but that doesn’t mean that you are. Creating a startup and running will be the most grueling experience you’ve ever gone through, but you’ll find that most founders understand and accept that price because it’s their own business. They want to go through all this because it would be their success if the company makes it. While you can sustain that for years –– the long hours and exhausting operations –– it’s quite possible that you will wake up one day and find that this is it. You can’t do it anymore. Burnout is real, and it’s a very valid reason for you to sell your company, because when that happens, you can’t do the business or the people any more good. 

Insolvency

This is the more popular reason why businesses are often sold. A company is said to be insolvent when it cannot meet its current or future financial obligations. Your business simply has bills to pay now and in the future, and if you can’t pay those, then your company is in trouble. Insolvency can be related to liquidity, which is when the business has assets, but they’re not in cash. This might be resolved by asking debtors to wait for a while until you manage to convert those assets into money.

The other option for insolvency is when a company doesn’t have assets or money to meet its financial obligations. In that case, liquidation is often the way out. This is when a company simply winds up its operations in preparation for selling. When that happens, the creditors will be paid what they are owed. 

Solvent liquidation

The company may be sold even if it is solvent –– can meet its financial obligations. This happens when the stakeholders decide to liquidate the assets, which is known as members voluntary liquidation (MVL), and it can be done for a variety of reasons. But as the professionals at Approved Recovery explain, liquidation can be a complicated process and it always requires expert help to make the most out of it for the business. When you appoint specialists to handle your company’s liquidation, you can maximize tax efficient returns on your assets, not to mention several other benefits you’ll be getting. The majority of the stakeholders must approve of MVL, and it happens when they want to retire or the company wants to stop trading in general. 

A change is needed

The company’s financial affairs aside, one more reason why many owners want to sell their companies is because they believe a change is needed. This is one of the hardest decisions a company founder could ever make, because it means they’ve come to the understanding that their company might be better off under someone else’s leadership. After years of giving the company everything, they understand that it is perhaps time to retire and hand over the reins. 

Wariness of risks

When you’re at the early stages of your business, you take risks all the time, because what have you got to lose? As things progress and your company actually starts growing, you grow more wary of risks, as others are dependent on your decisions and might be affected by the outcome. This especially happens with older business owners who don’t have it in them to take the risks anymore and they have neither the time nor inclination to fix problems that happen because of risks taken. This might be the best time to sell the business, because a company that doesn’t take risks isn’t moving forward.

Sometimes it is none of those reasons, but rather the founders’ personal decision. At the end of the day, no matter how much time and effort you put into the company, there will come a time when you need to sell, because it’s the smart business move. It is important that you have enough clarity and awareness to realize when you should just walk away.