Deciding to sell a portion of your business is never easy, especially if you feel as though you've invested much of your time, effort and soul into getting your business up and running. However, sometimes the arguments in favor of selling are strong enough to overcome the doubt and apprehension that you're experiencing.
The sale of part of a company's assets is also known as a partial divestiture. Typically, a partial divestiture occurs when the owner or CEO of a company no longer wants to own a given business unit or asset. So what are the situations where divestiture makes sense for your business, and what are the signs that you should sell part of your company?
You're Doing Too Much
In the course of operating your business, it should naturally expand, whether that means opening a new store, moving into a new industry, or offering a new suite of products or services. However, as time goes by, you may find that your business has grown too quickly, or that you have too much on your plate and are distracted from your company's core competencies.
This is a classic signal that a partial divestiture might be a good decision for you. Selling off the peripheral or the weakest-performing parts of your business will give you greater freedom to focus on what your company does best.
You'll Use the Funds for Better Things
Even when things seem to be going well, operating a small business is always a risky endeavor, and sometimes you might struggle to make ends meet. If you find that your company is in need of a cash infusion, a partial divestiture might be the right choice for you.
Selling off part of your business is an effective way to increase your cash flow. If you're looking to downsize your company, you can invest that money in more interesting opportunities that offer a higher return on your investment. You can also redirect the money from a partial divestiture back into your company to pay off debts and invest in your core business competencies.
The Sale Makes Sense for Your Business
Stretching your resources too thin and needing to raise funds are two extremely common reasons for a partial divestiture. However, there are also a number of company-specific cases where the offer to sell seems to make good business sense.
If the business you'll be selling to can offer you a strategic partnership moving forward, a partial divestiture might be a wise move. For example, the buyer might be able to provide you access to raw materials, additional customers, or special expertise that can give you a leg up in the industry.
You Need to Cut Your Losses
Perhaps you made an acquisition that isn't delivering quite as well as you had hoped, or perhaps one of your divisions has shown weak returns for the past few years. Whatever the circumstances, sometimes it's more cost-effective simply to say goodbye and sell off the underperforming business unit.
Selling part of your business that has shown volatile returns in the past might also be a good decision if you want to reduce the risk that your company faces moving forward. For example, if you plan to expand into new locations in the years ahead, you might consider selling off your riskier business units in order to have additional cash on hand and focus on the expansion without worrying about these risky investments.