Entrepreneurs are natural creators and innovators, so it’s not surprising that the ultimate goal of many entrepreneurs is to create, grow and then sell a brand so they can move onto the next new idea. But regardless of whether selling your brand is a goal of yours, there will be times in business when you will need to cull and prune back your offerings in order for you to grow again.
If the isolation and extra thinking time that’s accompanied Covid-19 has gifted you clarity and you’re ready to prune an offering or even an entire brand, this episode is for you. I share the advantages and disadvantages of selling a brand verses just closing the brand down.
Podcast: Play In New Window
In the past month, with a reduction in distractions, I gained crystal clear clarity on my path going forward. It’s not that I didn’t already have this clarity, my next steps just became much clearer to me.
I also immediately understood that this path required me to make some space. After all, to take new steps and grow you have to clear away the weeds and excess foliage first. To create this space I decided to close down my online eco-store Sustainahome. Once I had this clarity my action was swift. Within two weeks of making my decision I’d sold over 99% of stock and had closed the online store.
The benefits were felt instantly. I’d turned stock into cash and had slashed overhead costs in my business (inventory and warehousing) before a widely anticipated recession. But most importantly I felt freer and more available to step into my role of sustainability educator and business coach for educators and experts who want to make a bigger impact.
Now, rather than selling down stock I could have chosen to sell the online store and brand. Having sold my first business, online co baby store Sustainababy, five years ago, I knew the time and energy that’s required in a sale and while it was perfect for that brand at that point in time, it wasn’t right for me in this circumstance.
So, with first-hand experience of both a brand sale and closing down a brand now under my business belt I wanted to share the advantages and disadvantages of selling a brand verses closing the brand down.
Why Sell a Business or Brand?
Here are some of the reasons why you might decide to sell your business or brand:
- You no longer want to grow or manage the brand, yet you want it to live on.
- The brand is making a profit and has a solid platform for growth.
- The brand has a strong, loyal following and repeat customer base.
I sold Sustainababy because I knew I’d outgrown the baby niche. With my children past the baby stage I didn’t want to feel locked into blogging about babies and selling eco baby products long term. I was ready for the next stage.
Benefits of Selling a Brand
Here are some of the benefits of selling a business or brand:
- Can provide a fabulous pay day – typically 2-3 times annual profit of the business.
- Gives a strong feeling of accomplishment. You created and grew something of real value and that value has been reaffirmed by others.
- You free yourself up to work on other ventures.
- Your brand gets to live on!
Disadvantages of Selling a Brand
Here are some of the disadvantages of selling a business or brand:
- Sale includes additional costs (e.g. solicitor costs to draft up a contract).
- Sale includes additional time and energy (e.g. to prepare information packages about the brand, manage offers, maintaining the business throughout the negotiation and contact periods, handovers and training for the new owner).
- You have no control over the direction of the brand post sale. You need to emotionally detach from the brand and have all care no responsibility. This can be hard for some who have poured their heart into their start up.
Be aware that you also need to ensure that you don’t work in direct competition of the business within two years of the sale. This rule is to protect the buyer of your business.
Why Sell Down Stock and Close a Brand?
Here are some of the reasons why you might decide to sell down stock and close a brand rather than selling the business:
- You no longer want to grow or manage the brand in its existing form, however you see potential to pivot to brand into a new service or market.
- The brand isn’t making strong enough profits to attract a sale price that justifies the effort required in managing the sale (or paying someone else to manage the sale).
- You want to liquidate stock into cash as soon as possible.
- The brand following and customer base isn’t large enough to attract a sale price that justifies the effort required in managing the sale (or paying someone else to manage the sale).
I sold down Sustainahome stock because I didn’t want retail to be my main thing. However I knew I hadn’t outgrown the sustainable living niche and didn’t want to relinquish the Sustainahome name, domain and social media collateral. I wanted to leave the option open to pivot the brand out of retail and into another area in the sustainability niche when the time is right.
Benefits of Selling Down Stock and/or Closing a Brand
Here are some of the benefits of selling down stock and closing a brand rather than selling the business:
- Can turn stock into cash very quickly through a time-bound closing down sale.
- Can occur over a much quicker time frame than selling a brand (days or weeks rather than months).
- You free yourself up to work on other ventures.
- You can still retain the business/brand name for future ventures.
Disadvantages of Selling Down Stock and/or Closing a Brand
- You may have some regrets about not taking your brand to its full potential or creating a lasting legacy. However this might also be the case if you sell your business/brand!
At some stage in your business journey you’ll face the decision to sell your brand or close it down. By being aware of some of the advantages and disadvantages of each option you’ll be better placed to make the right decision for you.
Over to You!
Have you sold a brand or business? Did you decide to avoid the sale and instead sell down stock or just close the doors? What were the key elements why you made your decision and what were the advantages/disadvantages? Share below!
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