TMBA 344: 5 Reasons Not to Sell Your Business

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It’s almost a year to the day since Dan and Ian sold their business. They don’t regret their decision. But, during these past twelve months, a lot of “What Ifs” have been popping into their heads.

Recently they’ve been approached by some listeners who are also considering selling their businesses.  So, on this week’s show, you’ll hear some of the common questions that keep cropping up, as well as five reasons why selling your business might not be the right idea for you.


Listen to this week’s show and learn:

  • How your own business can yield better returns than any other kind of investment out there. (4:21)
  • Why you shouldn’t assume that you are going to repeat your success. (6:28)
  • The benefits of expanding your existing brand rather than selling off. (8:25)
  • How long it actually takes to sell a business. (10:53)
  • One of the things Ian would do differently if he were starting a business today. (13:44)

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Dan & Ian

Published on 07.07.16
  • Great episode guys. I just sold my own eCommerce business of 8 years so I enjoyed being filled with regret and despondence as I listened. :-)

    I’ll definitely relate to your sentiments for trying to figure out what to do with cash, it’s a huge issue right now that I know a lot of people are struggling with. Nothing comes close to comparing to the returns you get on a small business if it’s run leanly and well.

    You mentioned looking into opportunities to earn a return financing people’s inventory buys. Have no idea how good they are, but just heard about which does exactly this. Kind of like LendingClub but for inventory purchases for businesses.

  • Really looking forward to listening to this one.

  • Great topic. Super relevant to more entrepreneurs than ever before now. Looking back, I should have started a second side-business and built it to at least $1,000-$2,000 per month before I sold my drop ship site. I went ahead and sold it for $50k last year, but I didn’t have any other income coming in. I also was that same person you spoke about in the podcast who got lucky with my business but didn’t really know what I was doing. It took me a whole year to get going again, and it cost me another $1k-$2k in info products before I understood how to drop ship properly. I spent all the money just on living expenses in the last year (I live in LA). Good news is I recently launched 2 drop ship sites that are producing around $500 a week on average in net profits after the first few weeks, and I’m working on a couple more. It’s definitely way too much work, but I’m doing super-micro-niche drop ship sites, so it makes it a little easier to manage the inventory, content, marketing and conversion optimizations that way. More sales of less products + one marketing/sales channel = success. Gotta give a shout out to Anton Kraly and his DSL course as that’s what gave me the info and understanding I needed to get a profitable drop ship store started again. Also to Johnny FD for helping understand optimizations better. I really enjoy the TMBA podcast and have listened to you guys for a while now. Thanks for the great work and keep it up! -Trevor

  • Good observations, especially that the business is probably the best investment vehicle available to the entrepreneur.

    If the primary reason for selling is to free up time, it would be worthwhile to consider hiring someone to replace yourself in the business. That way, you still get the upside of the business as an investment, without the day to day time commitment. But in order for that to happen, you need to make sure the business is actually producing a decent return after paying all salaries (including your own). I think founders of smaller companies consider their own salary to be part of the profit/return, when in reality, that’s not the case.

    Good topic, thanks for sharing your perspective!

  • David Schneider

    There are two more reasons I could think of ‘not to sell your business’, which are related to point one and and point five.

    1. The first one is purely mathematical. Your return on capital goes down dramatically (ROC). You stop generating free cash flow for an unknown period of time. An empty apartment or empty house can be painful to see, while your are still burning cash. To compensate for this dramatic change of ROC and free cash flow generation, you most likely feel the itch to find an equally profitable investment/ business opportunity or even better. Hence, you are exposed to something more sinister and dangerous (see below)

    2. Cognitive Biases. You are much more likely to succumb to negative cognitive biases when you have lots of cash lying around. It’s a fact that people with lots of cash get trigger happy. Especially, when your immediate surrounding boasts of those fantastic revenues and net earnings their businesses create. (the grass is always greener type of reaction and the feeling of missing out). From here, we then enter a totally new playground. Risk and risk taking; odds of winning and losing etc.

    I think there are only a few logical reasons you should be selling your business. On top of my list would be the following three:
    1. You have to – the creditors are calling and you get squeezed out. Divorce is another good example.
    2. You know the business is going downhill from here. If you can’t tell as an insider, that your business may decline in the foreseeable future, it will be more difficult for an outsider to assess the situation. Curious to see what GoPro is going to do in coming months.
    3. You get offered ridiculous amounts of money – simple math will tell you when that’s the case – say hello to bubble money.

    Of course, there are always personal reasons for selling.

  • cheers Trevor thanks for sharing! I really like the idea of hedging your bet by getting something else going before selling.

  • Thanks David, point #2 makes a lot of sense to me. This isn’t all a numbers game afterall. In our society in particular there’s a ton of pressure to ‘do something’ with your cash.

  • thanks Andrew! will check it out

  • agree that taking a stab at hiring is a good idea + you’d learn some valuable lessons about managing businesses at a higher level that could pay off in the future

  • hope you dug it! :)

  • currently working on it! since i commented, i was able to get back into the e-commerce niche i sold, thanks to the buyer re-selling it, and doing $50k in sales per month resulting in an income that supports my wife and I full-time as we travel. however, im now doing what i wish i had started doing so long ago. im blogging, creating videos, podcasting, and creating online courses to help people learn how to travel, eat healthy, exercise, and start an e-commerce business. its a lot of work but im not doing it from a home office in los angeles anymore, im doing it from a coworking space in Chiang Mai, Thailand. the tropical mba podcast change my life. The “even if you’re alone in this entreperneurial journey” part of the intro always gave me that feeling of comfort and yearning to connect with other people on the same journey as me. coming out here to CMX has given us that connection and network of like-minded entrepreneurs and we are growing and evolving more than ever now. Thanks for the inspiration! Since I started back up, I came to the realization that it takes so much time and effort to grow a brand that it’s not worth selling unless its not fulfilling anymore. So, my plan is to keep the business for the long haul. I want to build it up, outsource the tasks, and have it be our vehicle for an early retirement of sorts, along side the future income we will get from all of our blogging/videos/podcasting and online courses.

  • hell yeah man that’s a great message to hear to start the new year. big congrats and best of luck in 2017!

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