Owner barely works and makes $1.5mm/yr. Why sell?

So you see this story a lot, and the story goes like this: a person starts a business, they work in it for 15 or 20 years, and they suddenly turn 55 or 60. In this period of time, they've gotten to know everything there is about this particular industry. They've also built up a management team and automated a lot of the business to where they're not spending much time on it. Maybe they're spending 10 hours a week, tends to be the kind of common refrain from this type of story. And this person has started to make some life decisions at that point, right? You're getting to be 55, 60, you want to balance out spending more time doing things that you enjoy and less time kind of working for the future, which makes sense, right? Like you're 60, the future isn't that long anymore. And you'll see businesses that kind of meet this criteria and they're potentially pretty profitable businesses, let's say making $1.5 million or $2 million a year. And those businesses come out on the market to be up for sale. So you've got this weird situation and kind of a question worth asking. This owner is only working 10 hours a week. They're making, let's say, $1.5 million a year. Why sell the business if you're only 55 or 60? Just doesn't make sense. A lot of people get confused by this. I'm going to explain why somebody in this situation would do this. And it's not about the money. That's what this video is about. My name is Michael. I'm a business nerd. My channel is about the things that people who own one or more businesses need to know and like to talk about and the issues surrounding that kind of stuff. So if business ownership and multi-business ownership is for you and you want to learn more about that, hit the subscribe button and stick around. So this story that I talked about actually came up today on my podcast. So I do a podcast every week called Acquisitions Anonymous. We go through and we examine one business for sale each week. And we look at the listing, we don't look at any confidential information, and we go through and we try to understand what is going on with this deal. Is it interesting? How should we think about it? And it's just kind of a business nerd fiesta. Like, we get together, the four of us, and kind of nerd out about the business. And one of the things we're always curious about is why is the seller selling? Why have they brought this thing to market? Because a lot of things you can learn about a business and evaluating it, you can learn by figuring out why the seller is trying to get out of it. For example, may have somebody who wants to get out of a business because they want to pursue other business interests, which is often code for I got got better stuff to work on. You'll see somebody who's in their 60s or 70s and they want to sell the business because they're retiring, right? Which is perfectly normal and a good explanation. But if you go back to somebody that says they want to pursue other business interests, uh, your mind always goes to understanding like, what is the better thing that they're going to be working on compared to this? That definitely isn't a good indicator that the deal we're looking at is of good quality. The deal we looked at today was a basically like a natural products business that was about 10 years old, located in Florida, and the seller said, I'm selling to pursue other business interests. And look at got a lot going on in this business. It's making $1.5 million a year. It's done that 3 years in a row without fail. Sales have remained constant. But the seller says, I want to pursue other business interests and I'm only working 10 hours a week. And look, my co-hosts, who shall remain anonymous for the sake of this video, they said something pretty interesting. They said, hey, if you gave me a business that I only had to work 10 hours a week on and I made $1.5 million doing it, I sure as heck am not selling that business. And I said, well, I've talked to some sellers who match this profile and it made 100% sense for them to sell their business despite all money and despite how little time it was taking them. And the answer actually has to do for them, meaning the sellers that match this profile, that it can make total sense that they would want to sell a perfectly good business that truly only costs them 10 hours a week of time and makes them a lot of money. They could— it makes total sense for somebody in that situation to want to sell their business. And the reason is not about the money. It's about psychology. Psychology of somebody who's built a business from scratch and built it up to something over that period of time, became an expert in that business, is that after 15 or 20 years of doing that business, it becomes really an integral part of your your personality and who you are. And you get stuck potentially in a mode of thinking about that business that would surprise a lot of people. And the reason is, to build a business from nothing to making $1.5 million a year in profit, you have to be emotionally all in on that business. It is almost time-consuming in terms of your energy, your focus, your time. Everything about you becomes about creating that business and turning it into something. And in that way, it's kind of like raising a little kid, like an infant from 0 to 18. Over that period of time, you go from crafting this thing that's basically just like a little pooping diaper machine to something that's like a full-grown adult. The only way to make How does that happen is, well, nature forces us to do it. You have to be an all-in parent who's totally focused on your kids and making their life special and the best adults they can be eventually. And so these sellers end up in a place that even though they've managed theirself to make a lot of money and only work 10 hours a week, emotionally, it's like they're still working 60 hours a week. They can't disconnect from the feelings that they have around that business. They are emotionally attached to that business they created. The only way they can save themselves from devoting 100% of their emotion and 100% of their life being and energy and shower time about their business and eventually being truly free and being able to relax is to sell that business. So in the end, like my co-hosts and early on myself before I talked to a lot of sellers like this, that's how we can look at it from just purely a monetary standpoint and see for these sellers that it just doesn't make sense to us. $1.5 million a year and I only have to work 10 hours a week. Sign me up. But in the end, these sellers are in a totally different place than us. They're trying to actually not get more money. They're trying to get free. There's other reasons that make a lot of sense for somebody that age to sell. They want to de-risk their life. They want to diversify. All that kind of stuff makes a ton of sense. But in the end, In the end, this is why it's important when you look at a business like this and you're like, man, there's no reason somebody smart would be selling this. It doesn't make any sense. The reason is, is you just haven't yet got to the point to truly understand what it's like to be one of these business owners who's gone through this 20 years of kind of killing themselves to turn something into something big and realize emotionally, like, there's no way out except for you to sell the business. In the end, hopefully this gives some people some perspective. Thanks for being here. I had fun going for a walk today. Check out my podcast, Acquisitions Anonymous. We'll put a link to it below. Catch you next time. Let me know what you think.