“Why are they selling?’ is a common refrain from buyers as to why a seller would sell a successful investment or business. The decision to sell is never a decision that is taken lightly and is often influenced by 3 significant life events, death, divorce, or distress. I would like to take a moment to delve into how these three Ds shape the motivations and circumstances under which people decide to sell.
Death, while natural and a part of our lives, oftentimes happens unexpectedly. It often involves dealing with estates and inheritances, where properties or belongings must be sold to divide assets among beneficiaries. Not to mention if this is a business with employees and partners can throw a monkeywrench into operations. This selling is not just a financial transaction but an emotional process, as it involves letting go of items with sentimental value. Selling here can occur due to heirs wanting to cash out or simply lacking the knowledge required to run the business. The sale can be used to help a family transition to life after the passing of a loved one.
Divorce, another critical life event, often necessitates the sale of shared assets. This process is not only about dividing possessions but also about individuals starting anew, which often requires liquidating shared assets to facilitate this fresh start. The emotional turmoil of divorce can affect selling decisions, sometimes leading to hasty sales under less-than-ideal market conditions. This urgency to sell can impact the final sale price and the financial futures of the involved parties.
Distress, whether due to job loss, debt, tax situations, or several other types of hardships, can force sellers into the market. Businesses can be in distress as well but in this instance, we are looking at distressed sellers. In these situations, the need to quickly access funds often takes precedence over waiting for the best market conditions or price. Sellers in distress may accept lower offers, affecting market values and creating opportunities for investors.
The 3 Ds are life-changing events for owners and their families. These events require finesse and consideration that can lead to some uncomfortable conversations with sellers and their families. Lead these conversations with care and remember you are there to solve a problem for these sellers.