Podcasts We Love: 5 Reasons Not to Sell Your Business
Monday, August 29, 2016
Our featured podcast this month is called Tropical MBA and is the brainchild of authors Dan Andrews and Ian Schoen. Episodes of their show have been used and integrated into business school curriculums across the United States.
The Tropical MBA podcast has also been downloaded over a million times and has active listeners in more than 100 countries.
The show’s focus is on building location-independent (or at least office-independent) businesses that can be run from anywhere in the world—hence the name Tropical MBA.
The podcast discusses a wide array of business and entrepreneurial topics, such as:
- Business know-how
- Generating worthy business ideas
- Apprenticing and mentoring
- Team building
- Business culture
This episode, titled “5 Reasons Not to Sell Your Business,” is the 314th installment of the podcast, and was inspired by the fact that Dan and Ian were actually entrepreneurs themselves. They developed an online e-commerce product business, which generated more than seven figures in sales. About a year ago, they decided they wanted to sell their business, so they did.
While Dan and Ian have not felt regretful about selling their business, they have thought about a number of scenarios if they had continued running it rather than relieving themselves of their company.
The episode discusses the hypothetical ins and outs of why, if you are in a similar position, (thinking about selling a business you’ve developed from the start-up phase), this may not be the best idea for you.
Dan and Ian came up with five considerations you should contemplate before marketing your business and inking a deal with a potential buyer:
- If you sell your business, you are going to find yourself with some cash in your bank account. Chances are you are going to try and make that money create more money, so start looking for investments. The thing to remember, according to Dan and Ian, is to not undervalue what you have done so far. They go on to say that many businesses are able to earn at least 20% in net profits, and the possibility of you finding an investment that would yield similar returns is quite slim.
- Do not assume you are going to repeat your success. It is never easy to start a business. There were many things at play when you developed your business, and you were lucky things turned out so well. Maybe you had a great idea, found a unique niche or created a product no one had previously thought about. Great ideas are not easy to replicate, so don’t let your ego lead the way.
- Your business gives you power. When you sell a business, you typically sell because you can make a big exit, meaning you can earn a lot of cash; however, a lot of cash without a company structure acting as a shield will expose you to the open palms of the government, the IRS and any other entity that may have a stake in your earnings from the sale.
- Closing a business sale could take a very long time. The authors themselves needed 18 months from start to finish in order to close their deal. In the meantime, once negotiations begin and a contract is drawn up, everything you put into the business—between the time you sign a contract and close the deal—will likely be unaccounted for, so most people stop investing in their own business. However, if you weren’t selling the business you probably would have continued investing, and may have done even better.
- Your business allows you to shape your goals to your liking. Dan and Ian introduce the concept of the Dreamline; this concept, in short, says that money is not everything and though sometimes you are not short on cash, you may be short on other invaluable things, such as mobility, time flexibility, quality family time and intellectual stimulation. Your business allows for and provides all of those important things.
Of course, this is just a short summary of the 20-minute podcast.
Click below to listen to the full episode. If you like what you hear, you can access a full archive of Tropical MBS podcasts.