Should You Keep or Sell Your Business? (2024)

1. What do I want my financial future to look like?

First, take a look at your current financial position to set a baseline. Review your bank account, investments and assets then compare them to your recurring expenses. This will give you a high-level picture of your net worth today. Next, it’s time to look into the future. Consider how you want to approach work. This could include starting another business, downshifting to part-time work or retiring. Imagine the desired lifestyle you’d like to have if you keep or sell your business.

2. When do I want to step away?

The decision to step away from your business generally comes down to two conditions: market and personal. Market conditions impact the bottom-line sale figure, and include everything from economic cycles and trends, tax environment, industry dynamics and your company’s own operational trajectory. Timing the market can increase (or decrease) your likelihood to sell.

Personal conditions impact your willingness to walk away. Factors such as emotional preparedness, health, family and financial position play a significant role in guiding your decision. If you’re not ready to sell, for one reason or another, even the biggest offer won’t move you. To determine the right time to step away, take a hard look at these two conditions. A helpful exercise is to list the factors that are likely to impact your decision and consider how strongly each factor weighs on your mind. It can also be helpful to talk this decision through with a trusted friend or industry expert.

3. What is my risk tolerance?

Each person has their own unique risk tolerance. Some prefer stability and security, following a careful plan to ensure certain results. Others may be comfortable taking on more risk to potentially reap greater rewards. When it comes to the keep-sell decision, risk tolerance can influence your decision, even if you don’t realize it. Before making your final decision, here are a few practical steps you can take to measure your risk tolerance:

First, look at your current financial picture and consider how you would feel if your net worth decreased. This will give you an idea of how you might react to different market conditions. Second, consider your current lifestyle and financial goals. Determine how much risk you can afford to take on without compromising your standard of living, now and in the future. Lastly, define what “selling” means and decide which sale structure you would prefer. For example, selling to a third party might have less financial risk than selling to a management team because you’re likely to receive all cash versus a note. There’s no right level of risk tolerance. But it’s important to know where you stand before deciding the fate of your business.

4. Am I emotionally prepared to sell my business?

Emotional preparedness may be the most important factor in the keep-sell decision. Business owners ignore advantageous market conditions, their own financial needs and financial risk considerations, because they simply aren’t ready. One way to visualize life after selling is to ask the question: what will I do tomorrow if I don’t have my business? For an owner who has spent thousands of hours each year, tending and growing their business, this scenario can feel overwhelming.

If you don’t have a strong answer to this question, invest more time thinking about what you want out of the future. Maybe you’re ready for something new. Maybe you’re not ready to step away. Maybe you’re planning for life to change. Only you know whether it’s the right time to sell your business. Whatever your answer, you must feel confident in your decision.

5. Do I have the professional support needed to make this decision?

Gathering all the pertinent information (i.e. financial documents) to make the keep-sell decision is tedious and time-consuming. Therefore, finding trusted professional partners is critical to make sure no details are missed. The best way to approach this process is by working with financial planning and investment professionals, like those at Comerica, to analyze your needs, assets and expected cash flow. Our team works together to ensure you feel informed and confident with your decision. We handle the details so you can continue to focus on your business. To learn more about how we can provide further guidance on keeping or selling your business, schedule your 30-minute assessment with Bob Buchanan today.

NOTE: IMPORTANT INFORMATION

Comerica Wealth Management consists of various divisions and affiliates of Comerica Bank, including Comerica Bank & Trust, N.A. and Comerica Insurance Services, Inc. and its affiliated insurance agencies. Comerica Bank and its affiliates do not provide tax or legal advice. Please consult with your tax and legal advisors regarding your specific situation.

This is not a complete analysis of every material fact regarding any company, industry or security. The information and materials herein have been obtained from sources we consider to be reliable, but Comerica Wealth Management does not warrant, or guarantee, its completeness or accuracy. Materials prepared by Comerica Wealth Management personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of Comerica Wealth Management, including investment banking personnel.

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