I have heard off-the-cuff opinions such as:
- Only when you get the highest Price.
- I will not sell unless I get all cash.
- Do not sell unless you know what you want to do next.
- Everything is for sale… for the right price.
- If it is a good business that makes money, then don’t sell.
The above answers just address the price and terms…but there is much more in a business owner’s decision to sell.
What is the Opportunity Cost of Not Selling?
We exist in a world of limited resources such as time, energy, talented people, and capital. Consequently, the true cost of not selling is the outcome one could have achieved from committing those same limited resources to a different course of action. Said in a different way, there is only so much time, energy, and capital available to a business owner at any particular point of time, and those resources invested in a business are not available for him/her to use, enjoy, or invest in other ways.
The opportunity cost of being involved in your current Company might include giving up:
- Another business venture or opportunity
- Time for rejuvenation and reflection
- Friends, family, and grandchildren
- Diversification of investments or reduced risk
- New challenges, intellectual stimulation, or education
- Health, travel, community involvement, spiritual service
- Or, any other opportunity that can not be pursued because of the demands of your current Company.
The opportunity cost is relevant only in terms of the life goals of the business owner. When a business owner decides that the opportunity cost of owning his/her Company is greater than the overall value (not just money) received from owning the Company, it is time to seriously consider selling. Conversely, a business owner should not sell if he/she finds the business provides the most satisfying, enjoyable, and profitable way he/she can invest his/her time, energy, and capital at the moment.
Many business owners have been involved in their companies for so many years that they have a difficult time envisioning what their life will be like after they sell. Once they sell they are free to discover other opportunities. Not having the freedom to discover alternatives is one of the opportunity costs of business ownership.