Last month we talked about Energy Level being the number one reason a business owner decides to sell their business. Did you know the second most common reason a business owner decides to sell their business is due to them looking for their next business opportunity? By their very nature, entrepreneurs are always looking for a new challenge. Ideas are always bubbling to the surface. Most can be discarded quickly as being too expensive, too time-consuming, or too impractical.
But occasionally a viable opportunity will present itself. A business owner will identify a new market with great growth potential but realize he cannot run both companies at the same time and be successful with either.
We once sold a business for an entrepreneur who had four different companies, each of them extremely profitable. The owner saw an opportunity to grow one of the companies from $20 million a year to $100 million. But he neither needed nor wanted to deal with the distraction of running one of the other companies, which was bringing in a solid $10 million in annual revenue. This was a great company and an excellent opportunity for the buyer, but the owner just didn’t want the company any longer. We found a buyer for it.
We also run across owners of companies who have many different franchises. Some of these people manage their fleet of stores like a stock portfolio. They buy and sell some businesses each year based on many factors. These are viable businesses but they do not fit into their strategic plan.
Most of the time, the capital needed to launch the new business comes from their equity in the old business.