Selling a Healthcare Company - The Reasons Business Owners Sell May Surprise You

by Mike Ryan, President and Founder of Healthcare Capital and Mergers, LLC

The saying that a business owner's company is his or her baby exists because it is true. A business owner puts his or her heart and soul into the company and works whatever hours are necessary to ensure that the company survives and prospers. The owner also considers the company's employees part of his or her family and worries about their future and finances as much as their own. This passion for the company and employees makes selling or letting go of their baby very difficult. As a result of this passion, some of the reasons an owner decides to sell may surprise you.

The top reason for selling a company is not the lust for money as you may expect. The owner is not selling because he wants a bigger plane or yacht. It is actually quite the opposite. The business owner tends to love to work and loves the company. While we all have bad days, running the business is the owner's passion, hobby and often favorite thing to do. There is a fear of selling because the business owner likes the challenge of business ownership.

Age and health considerations are a top reason to sell. Most often the owner really does not want to sell and tells me that if they were twenty years younger they would keep on going. I have heard many owners say that they cannot slow down because they have not been able to find employees they trust enough with key responsibilities. Another factor is the small percentage of children that want to take over family businesses today. Most children of entrepreneurs are picking a different career path or do not want to work the long hours that it takes to own a business. Without a family member who is willing to do whatever it takes to run a company and/or employees that you can trust, the owner realizes that their only option is to sell.

Another top reason for selling is that the company has become an administrative nightmare or does not have the distribution system necessary to take the company nationally or worldwide. The owner had the vision, saw a need in the market and started the business. However, as the company grew the administrative demands also grew. The owner now finds that administrative duty is taking up the majority of the day. Since most entrepreneurs have a background in sales and operations they do not like or understand the administrative issues. The owner finds that they can no longer service all the customers in a national or global environment and deal with employee issues in the way they could when only a handful of each existed. In this case the business owner sells after deciding that they would like someone else to take the company to the next level. The entrepreneur has built an excellent foundation and will take the proceeds of the sale to start up another company.

Unfortunately, many owners wait too long to get help with administration and are forced to sell as the company runs into financial problems. The owner spends his day putting out fires as the company is not set up to handle the new volume of sales. In this case, the owner tends to burn out as they cannot work enough hours to keep up. Family issues tend to come to play as the financial stress and long hours put a burden on the owner's family. Most of these business owners will start another company after selling their first, using the proceeds and the knowledge they have gained to do it again. Many clients have started and sold multiple companies once they realize that they love the start up and not the very different duties of running a big company.

Cash flow problems force many sales. Most businesses are boot strapped, using charge cards and 401k money to start up. The owner has a vision that is viable but underestimates the amount of capital required to achieve his or her goals. The economic environment or regulatory environment can change making the start up plan impossible to implement. As I previously mentioned, most owners come from an operations and sales background and do not have expertise in managing cash flow. The owner in this case does not want to sell but finally has to out of financial necessity. The owner spends most of his or her time dealing with the bank and vendors and is unsure of how to make the next payroll. As in the case above, the pressure from cash flow problems also puts a burden on the owner's family. The owner has to sell all or part of the company in order to raise capital. As you would expect, most of these entrepreneurs go on to start another company, taking with them a wealth of knowledge that can only be gained through first hand experience.

In most cases, an owner may have had a few bad days but loves the business they created and will only let go for a very good reason. Of course it is nice to get the big payday, but for most of us we enjoyed the ride and realize that it was just time to cash in our chips.

If you are considering selling your company call Healthcare Capital & Mergers, LLC for a complimentary Business Capital Review to discuss your options. We will also provide you with a free ballpark valuation of your company.