Two Triggers That Cause Business Owners to Press the Eject Button





Two Triggers That Cause Business Owners to Press the Eject ButtonHave you ever wondered what prompts a business owner to put their company up for sale?

I put that question to the head of mid-market M&A for a Toronto-based investment bank specializing in selling companies (he requested anonymity).

1. Unsolicited bid

“Typically, a client calls us because they have been approached out of the blue by a buyer.” My banker friend went on to explain that an unsolicited advance causes a business owner to start thinking about what his or her business might be worth.

2. Health scare

I asked my contact to reveal the second most common trigger: “It’s typically a health scare,” he said. “The owner, a close friend or spouse has a health issue, which causes them to reflect on how short life really is.”

Interestingly, both of these triggers are externally generated and could lead to a hasty sale with a discounted price. In my experience, you need a proactive plan to sell your business to maximize your valuation.

For example, I’m on the advisory board of a small company based in California, and I’m writing this post on the plane on the way to our next meeting. I just read the company’s board package, and it’s trying to decide between four different growth strategies. It has outlined the possible exit options — complete with potential strategic acquirers — associated with pursuing each plan.

If you want to get the highest price for your business, don’t leave your exit planning up to somebody or something you don’t have control over.

4 Comments ▼

John Warrillow


John Warrillow John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable (i.e. sellable) company at Built To Sell.

4 Reactions

  1. Isn’t that what Buffet did in buying Pella Windows?

  2. Anecdotally it seems that business owners with true passion don’t start businesses with the exit in mind; they start businesses to help people, apply their creativity, etc. If you’re only in business to sell the business, investors seem to be more incredulous.

  3. As a former Navy jet jockey / hot dog / legend in my own mind, I always operated by the 5P’s. Prior planning prevents poor performance.
    I have not prepared to exit my business, other than having younger family members who know day to day operations to take over.

    Our ejection seats had a handle which one pulled to bring a curtain over your head to reduce wind blast. Or, if you could not reach above you due to G forces, there was another handle located between your legs which you could “pull” up.

    Much like my business I would not want to accidentally lean on or push a button that could blast me out of the safety of my plane.

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