Founder Focus

When Should a Founder Sell Their Business?

Building a business is like raising kids—you get lots of advice in the beginning, but no one tells you what to do when they grow up.

And even if you’ve done all you can for it, selling a business you created is a big decision. So how do you know the time—and reason—is right? Here are three of the big reasons founders decide to sell and what else you should consider if you’re thinking of selling.

The Top Reasons Founders Sell

You’re taking a step back
As a founder, you may be ready to work less, ease into semi-retirement, or let family members take on more responsibility for the business.
You want the business to evolve
If you’ve taken your business as far as you can—or as far as you want to—you may consider taking on a role that is less stressful and less involved in the day-to-day activities.
You want to exit
You may simply be ready to exit the business for retirement, health concerns, to spend more time with family, or for another personal reason.

But, is the timing right?

Most founders eventually reach a point where they want to do something different with their business. Whether it’s passing it down to the next generation or selling it to new owners, it’s important for a founder or family to control the timing of that decision.

Consider these questions when determining if it’s a good time to sell:

  • Is your business established in its market?
    A solid foundation helps you get value from a sale.
  • Does your business generate consistent sales?
    The company needs to be healthy enough to handle the stress of a sale
  • Is your business profitable with the potential for growth?
    You’ll have more interest in your business if you have a positive cash flow.
  • Do you feel like you’re hitting a ceiling?
    If so, think about whether the business would benefit from institutional ownership and additional resources to hire more executives and managers to help grow the business.

When your company is doing well and has prospects for future business, it’s a good time to sell. The entrepreneurial mindset that many founders have is great for starting a business and getting it off the ground, but growth and expansion require other kinds of knowledge. That’s why many founders sell their business but stay with the company in a non-executive position. The company will then bring in people who manage and scale the business while the founder continues to do the work they enjoy.

community — An often-forgotten consideration

Another important aspect of selling a business to think about is how a sale will affect everyone involved in your business. When you’ve been working on—and in—a business for so long, you can lose sight of how important your company is to a community. At Trivest, we view businesses as living, breathing entities. We know that beyond the founder and family, businesses also serve employees, customers, and communities.
Selling a business can create significant opportunities for both employees and community members. Private equity firms like Trivest have allowed companies to continue to grow immensely and provided opportunities that employees wouldn’t otherwise have. For example, many times Trivest will turn the employees of a portfolio company into stockholders—all of whom participate in the success of the exit when that happens.
Beyond creating wealth for equity holders, when done right, a business sale can improve the lives of others connected to the business by allowing the company and its people to achieve their potential.

Seeking partnerships for growth

Working together with a private equity firm and their institutional resources, you will be able to grow your company in ways you couldn’t have otherwise.

That said, at Trivest we’re not about “growth at all costs.” We design our partnerships in a way that fosters both success AND good relationships. How? We listen. We meet founders on their terms, and we structure our investments in a way that works with their goals and values.

For example, many private equity firms require founders to reinvest as part of the deal, but Trivest might have been the first firm to make that optional.

Our strategy in a nutshell: We buy stable businesses that are set up to be around for many years to come. Our best investments come from partnering with families and founders who share our values and have built great businesses that will continue to grow.

If you’re wondering whether you should sell your company, check out “Why Founders Should Sell to Private Equity” to learn more about the ways private equity can help you make the transition.

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