When Should I Sell My Business? The Pros and Cons of Exiting Your Company

Last year, I sold my software company (Long Tail Pro) that I had built and run for 5 years.

Deciding whether or not to sell that company was an intense process and left me with several sleepless nights.  This was a significant business that was by far my biggest revenue generator and income source, so it was no small decision.

Ultimately, I feel like I made the right decision to sell the company…and I'm glad I can still say that over a year and a half after the sale!

But now here I am again, I'm looking to sell another business.  As you may have seen on some of my recent income reports, I've built up a great niche site + Amazon FBA business that has averaged $15k net per month over the past 12 months.  (This is my “Home Goods Brand”).

Even though I've been through the process before, I still find myself struggling with the decision: Is selling my business the right move?

So, today I'd like to walk through some of the pros and cons of selling a business.  In the process I'll share some of my thought process and hopefully help you think through your decision if you are considering selling a business as well.

Why Would Anyone Sell a Profitable Business?

The business I am looking to sell in the very near future is quite profitable.  As mentioned, it has netted me an average of $15,000 per month for the past 12 months.  I started the business about 2 and a half years ago.  

I also spend less than an hour a week working on the business.  I do have an employee that probably puts in 3 to 5 hours a week into the business.

So, if I don't spend any time working in the business and it's profitable, why would I consider selling it?

The answer is risk.

While the business is going well now, I can't predict what the future will bring.  Since this is an Amazon FBA business, I don't know if Amazon will change something tomorrow that will drastically reduce the sales of my business.

This unpredictable risk is enough for me to consider selling.  I've had a good run for 2.5 years. Is risking $450,000 (a very rough estimate of value) worth it?

So one way to look at is this:

• I can take the guaranteed $450,000 now.  Or I could keep rolling the dice that Amazon won't change anything and try to grow the business.

However, this is just one way to look at things.  There are several reasons to keep and run a profitable business as well.  

Reasons to NOT Sell Your Business

One reason to keep a business rather than selling is if you think you can grow it through your own efforts.  You might be able to adjust pricing, explore additional sales and marketing channels, or perhaps bring in new products.

There are lots of levers you can pull to try and grow a business.  Have you explored all of these options?  If not, perhaps you should focus on growth rather than selling your business.

In a nutshell, you have to consider whether or not you are leaving growth on the table and is the effort to achieve that growth within your skillset.

With my business, I potentially could do the following to grow the business:

• Increase my link building and SEO efforts to make more sales on my own platform (outside of Amazon)
• Optimize listings and conversions better on Amazon
• Get my product into retail stores
• Increase paid traffic strategies
• Create new products

I have experience with SEO and creating new products, so these are both levels within my skillset that I could leverage.  I have minimal experience running my own paid traffic campaigns, but I could always hire someone.  The same could also be said for retail.

Other Pros and Cons to Consider

When it comes down to it, there are TONS of factors for people to consider; and every business is unique and everyone's personal situation is unique.

I know this may be a little different, but I am going to make a Pros and Cons table and walk through my individual decision making process for whether or not I should sell my Home Goods Brand business.

Pros to Selling	Cons to Selling
I could get paid up to $450,000	I don't really need the money (thanks to my previous exit).
I could use the money to invest in real estate or some other passive investment	$15,000 a month is a significant revenue stream to give up.
I could use the money to buy another business that I feel like I could grow more easily	There is TONS of growth potential
I wouldn't have to worry about Amazon	Will I have enough monthly revenue to cover my existing employees if I sell?
Free up mind power to focus on other existing business ventures	I'm leaving a lot of cash on the table if I can grow the business over the next year
Would free up a little bit of my time	The cash flow is enough to hire more employees that could work in the business to grow it or work outside the business to grow my other ventures
My skillset is better geared towards digital products vs. physical products	I could hire people with the right skillset to grow the business
I've become a bit bored with the business, other ventures are more exciting
Another owner could likely grow the business with a fresh set of strategies

 

As you can see above, I've bolded the pros and cons that I'm placing the most emphasis on.  These are the points that I'm thinking about most. 

For me, I think I'm ready to sell because Amazon is still a single point of failure.  Yes, I generate perhaps 10% of my sales outside of Amazon, and I do refer significant traffic to Amazon with my own website.  However, I still know that if Amazon were to change something drastically tomorrow, my business could get cut in half or worse.

Others may not view the risk of being reliant on Amazon as that big a deal.  I may be being overly cautious, because obviously Amazon is not going anywhere soon.

At the end of the day, that's why there would be lots of upside potential for a new owner as well.

What I Plan to Do With the Money

If I sell this business, I'll be left with a significant amount of capital to invest in other things. What should I invest in?

Right now, I'm looking to turn some of the capital I generate from my “active” businesses to more passive investments like real estate.  At this point, I have not made any real estate investments, but I plan to.

And yes, I would use a property manager so that my investment is as hands-off as possible.

I've been consistently investing in the stock market and will continue to do that.  However, I started investing in Bitcoin and Etherum a little while ago and will likely put some more money into these or other crypto-currencies. I feel that as a sector, there will continue to be strong growth in this area for a number of years (but also highly volatile).

I also made my first loan on Prosper.com, and depending on how that goes may beef up some loans there.

Other than that, I'll keep a little bit of money in the account until I figure out what my next venture will be. 

But then again, maybe I'm counting my chickens before they hatch and no deal will ever come to fruition!

Your Thoughts?

Overall, what are your thoughts about selling a business?  When is the right time to sell and when is it not the right time?  I'm open to hearing your thoughts in the comment section below.  Thanks!

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