In this business assignment, I have to break down when I should sell my business, if ever. And if I were to sell it, at what valuation?
First, I have to break down what I consider the three business types. The business type affects my decision sell it or not.
The first business type is what I call the calling business. The calling business is any business that you run which has a purpose other than making money. It’s something that either has sentimental value as a family business, or is there to serve a purpose. Without your leadership, the calling business would become tainted and crumble. You cannot sell the calling business unless you really trust the buyer.
The second business type is the antithesis of the calling business. Its purpose is to become massive and make the most money possible. I call it the money maker. You don’t own it because of any sense of greater purpose or to solve a problem, but because it’s really profitable. You’d sell the business if the price offered outweighs its profit potential or you’re simply tired of running it.
The third business type is the low-value business. This is the type of business that’s just too small to sell. It could be anything from a freelance job to an Etsy shop. Whether it has the potential to grow into a calling business or money maker is another question, but right now, it’s neither.
So, at what valuation would I have to reach to sell my business? For me, it depends on a couple of factors:
If I’m well off in my career and nearing seventy and I have a trustworthy replacement, then I’d consider selling my calling business. However, I doubt I could find such an heir. I would probably keep the calling business in the family.
The money maker is supposed to be sold or taken public on the stock market. Once again, it depends on how old I am, and if I’m interested in starting another company. By selling the money maker, I’ll have access to funds to start another business, but by taking it public, those resources are tied up in stock. To sell all my shares, I would doom the company. If I’m not interested in starting another company, I can almost guarantee you I’d take it public. By doing that, I’d be able to live off the stock dividends for the rest of my life, and my kids could sell the stock after I die.
When it comes to actual numbers, I wouldn’t sell the money maker unless it was worth over 4 million dollars. And I consider anything worth less than 250 thousand a low-value business
Asher Sisneros 