If you’re looking to exit your online business, you may be considering whether you would be better off selling or simply closing it. While many business owners may assume that selling is the right move, it is worth weighing the benefits and drawbacks of each in order to decide which is the best course of action for your business. 

In this article, we discuss several things that will help you answer the question of whether to sell or close your business, including:

• The pros and cons of selling your business
• The pros and cons of closing your business
• Factors to consider to determine if you should close or sell your business
• Four steps to prepare your business for sale

Related Article: 6 Tips for Business Owners On How To Sell a Declining Business

The Pros and Cons of Selling Your Business

First, we’ll take a look at both the pros and cons of selling your business, starting with the pros. 

Pros of selling your business

The most obvious benefit of selling your business is that, in general, it is much more profitable than simply closing it. In fact, much of the financial value that online business owners receive comes at the time of selling it. For most entrepreneurs, this factor alone makes it an easy decision to sell instead of close. 

However, selling is only worthwhile if you have a business that is attractive and valuable to potential buyers. If your business would have a hard time selling or would only fetch a negligible profit, this factor may not apply to your situation. 

“The most obvious benefit of selling your business is that, in general, it is much more profitable than simply closing it.”

The profit you receive from selling your business can then be used for investments, future business ventures, or to fund a big purchase, like a house. 

Secondly, there may be tax benefits to selling your business. Of course, this depends on your unique tax situation. Before deciding whether to sell or close, speak with your accountant to determine how each decision would impact your taxes.

Financial considerations aside, many owners find personal satisfaction in knowing their businesses will continue to operate and grow after they move on. By selling your business, you give it the opportunity to continue thriving long into the future. 

“While some businesses sell in as little as a few weeks, some exit journeys stretch over months or even years.”

Cons of selling your business

While the pros of selling your business are pretty clear, there are some downsides to be aware of. As we mentioned, not all businesses are in a position to sell successfully. If you have a weak business that fails to attract much buyer interest, the selling process can be a long, stressful, and emotionally exhausting process.

Even if you do eventually sell your business, the process can take some time. While some businesses sell in as little as a few weeks, some exit journeys stretch over months or even years. For some owners, this may not be possible or worthwhile. 

The Pros and Cons of Closing Your Business

Now, we’ll turn our attention to the pros and cons of closing your business, starting with the pros. 

Pros of closing your business

When you sell your business, you are not fully in control of the process. While you do have control over how you run the company, your exit strategy, and your execution of that strategy, many factors remain outside of your control, such as how many interested buyers make an offer, what those offers are, and whether a buyer moves forward to finalize the sale. 

When you close your business, you have much more control over how things unfold. You can generally close it at a date of your choosing as opposed to being at the whims of a buyer. 

Secondly, closing a business can generally eliminate all debts and liabilities to third parties, providing you with a clean slate with which to start over.

“When you close your business, you have much more control over how things unfold.”

Cons of closing your business

The most obvious drawback to closing your business is the financial loss that comes along with not selling it. Even if your business is not currently in a position to sell for a profit, it doesn’t mean that it couldn’t be in the future with a little work to optimize it. 

Another drawback to closing the business is your employees will lose their source of income. While this may not affect you directly, it is worth considering while making this decision. 

Lastly, some owners may feel an emotional toll knowing their business ended in closure. For others, this may not be an issue. Only you know how you will react emotionally to closing vs selling your business. 

Factors to Consider to Determine if You Should Close or Sell Your Business

There are several factors to consider that will help you understand whether you would be better off closing or selling your business. These include:

• The strength of your business
• Market conditions
• Your exit goals
• External circumstances

The strength of your business

The strength and profitability of your business is perhaps the most important determining factor when it comes to this decision. As we’ve mentioned, a strong and profitable business will likely fetch a hefty profit when sold, creating a strong incentive to move forward with selling it. 

A weak business may fail to attract interest from buyers, reducing the final sale price and making the selling process considerably more difficult. If you find yourself in this position, you may be better off closing it instead of selling it. 

“A strong and profitable business will likely fetch a hefty profit when sold, creating a strong incentive to move forward with selling it.”

Market conditions

The current state of the market and the larger economy also play a crucial role in your calculations. If the market for businesses in your industry is strong, you are more likely to attract interest in your business, even if it is a bit weaker. This, in turn, may encourage you to sell. 

However, if the economy is in a recession or your industry is declining, you will likely experience reduced demand for your business, even if it is fairly strong. This reduced demand can lead to a more difficult and less profitable sale. In this situation, closing your business may make more sense. 

Your exit goals

It is also important to consider your exit goals. Are you seeking to exit with a hefty payout in order to fund your next business venture or retirement? In this scenario, selling your business is clearly the way to go. 

Or, perhaps your goal is to move on from the business as soon as possible in order to free up your time for more important ventures. In this scenario, you may feel some incentive to close the business instead of going through the selling process. 

External circumstances

Lastly, your external circumstances will weigh heavily in your decision. Some owners may need to move on from the business as quickly as possible for a number of reasons, including:

• Personal health
• Caring for a loved one
• Pursuing unique opportunities

Others may feel so mentally and emotionally exhausted from the business that they decide it is in their interest to move on quickly for the sake of their mental health. 

While these external circumstances play a role for some, many owners may not need to move on from the business so quickly. If you find yourself in this position, the most compelling option is usually to sell your business instead of closing it. 

4 Steps to Prepare Your Business for Sale

If you do decide to sell your business, there are several things you should do to get it ready for the market, including:

• Enlisting the help of a business Advisor
• Getting a valuation
• Creating an exit strategy and optimization plan
• Optimizing your operations

“Most entrepreneurs find it crucial to enlist the help of an experienced business Advisor, or business broker, to help them navigate the exit process.”

Enlist the help of a business Advisor

Selling your business can be a complex process, especially as a first-time seller. At the same time, there is a lot riding on the success of the sale. For this reason, most entrepreneurs find it crucial to enlist the help of an experienced business Advisor, or business broker, to help them navigate the exit process. 

Your business Advisor will help you every step of the exit journey, from valuing your business and creating an exit strategy to negotiating deal terms and closing the sale. 

Get a valuation

One of the first things your business Advisor will do is provide you with a thorough valuation of your company. In addition to letting you know how much your company is worth, your valuation will also reveal its strengths and weaknesses. 

Create an exit strategy and optimization plan

Armed with the knowledge from your valuation, you and your Advisor can then create a personalized exit strategy. At the same time, the valuation will also help you understand the aspects of your business that require attention before listing it for sale. 

“You should leave yourself 12–24 months to prepare your business for sale in order to give yourself the best shot at a truly successful exit.”

Optimize your business

Lastly, most business owners find it necessary to optimize their business operations to prepare their business for sale. This could include cleaning up financial statements and other business documentation, mitigating risk, driving growth, and ensuring the transferability of the business. 

Don’t leave this step to the last minute. Many improvements take time to yield positive results. In fact, you should leave yourself 12–24 months to prepare your business for sale in order to give yourself the best shot at a truly successful exit. 

Conclusion

While there are pros and cons of either selling a business or closing it, most business owners find they will be better off selling. However, take some time to consider your own situation to determine which option is right for you.