No one can tell you exactly when it is the right time to sell your business except you. A professional business broker can assist you in getting the best price for your company, and can indeed advise on the strength of the selling conditions, but ultimately letting your business go has to be your decision. The reasons may be manifold, and the timing totally subjective, but if you are wrestling with your conscience, here are important signs that now may be the time to take the leap.
Timing the sale of your business, in an ideal world, would be based solely on performance. Logically it is better to sell a business that is on an upward trend, but then of course, owners are more reluctant to sell. An upward spiral certainly attracts buyers, while decreasing performance may drive down the price. Consider your liquidity, and whether it is sustainable. Do you have the ability to raise more capital if required? Is performance consistent or are you experiencing peaks and troughs?
If your business has seen substantial sales growth, do you have the ability, capital and resources to continue in that vein? Alternatively, performance may have been lagging for some time and you simply feel that, for whatever reason, you can’t turn it around. Maybe your business partner wants to get out and you don’t feel ready to, or simply can’t, go it alone.
Then there are other factors. Perhaps you recognize the fact that you have nearly taken the business as far as you can take it with your particular expertise. Do you have access to the knowledge, equipment, people or whatever it may be to take your company to the next level? If you have any doubts that you do, this may be a sign that it is time to sell.
And then there is the possibility that you have simply been made an offer that, to paraphrase Don Corleone, you can’t refuse. Every business has its price.
Your business doesn’t operate in a vacuum. External, environmental factors are vitally important to consider at all times when running a business, and this does not change when considering if now is the time to sell. To put it simply, are the current selling conditions favorable? To answer this, there are a myriad of considerations.
Is your particular niche sector riding the crest of a wave? Is the capital gains environment attractive? (the answer to that question right now is a resounding “yes!”) Is your business killing it? Nobody really wants to sell their business when things are great, but price-wise, if success has been consistent, this of course is the best time to let it go.
On the other hand, it is also important to remember that things are not always great, and that the rough most certainly must be taken with the smooth. Is your industry in danger of becoming saturated, or is it under threat from a dynamic new product or service? Are Federal trade conditions helping or hampering your business? Sometimes the threats simply start to overwhelm the rewards (but of course be aware that any savvy buyer will also know this, and the selling price will be affected accordingly). An eagle-eyed owner will know when the market is starting to move against their business, and if you believe you lack the ability or resources to fight back, then this is once again a sure sign that it’s time to sell.
We arrive at this section last, but of course, business considerations can only be meaningful when personal circumstances dictate. It could be the best time or the worst possible time to sell (and of course a seasoned professional can help identify the former, securing the best possible price, and indeed maximizing your return in a less advantageous situation).
Sometimes life just gets in the way. Or should that be, sometimes business gets in the way of life? If now is the moment to spend more precious time with the kids, a partner, or just invaluable ‘me time’, listen to what your heart is telling you.
Perhaps the skill in which you have grown your business has been duly noted, and now an intriguing offer has been made. Not only is it an exciting new challenge spelling a new chapter, but here is a chance to be an employee for a change, and all the changes in responsibility that brings. However, if the very reason you started your own business was because you didn’t want to work for someone else, has anything truly changed? Could you be making the same mistake?
Maybe you need a cash injection for another opportunity that you view as potentially more fruitful, or it may simply be that your enthusiasm for your venture has run its course and it’s time to move on. Maybe you have to relocate for family reasons and commuting back and forth would see a dramatic drop in that precious work-life balance.
Then there is the possibility that it was never your intention to do this for the long term. Your exit strategy was always to sell your business, and now is that time. Many business owners come to the realization that they no longer ‘need’ to do what they are doing – that a comfortable retirement is already achievable. Then again, what would you do with that retirement? If you think you would miss the challenge, then maybe selling is not the right idea. But remember, getting out completely is not the only option, as many owners stay on in an advisory or consultancy position to the new owners. Perhaps you just want to be retained as an employee – dictating that it’s now someone else’s turn to deal with the day-to-day stress of running a business. Other owners simply find that as time goes by the risks suddenly don’t start matching the rewards – that’s totally normal. Often we are not the same person in our fifties as we are in our thirties.
And then there is the possibility that you are exhausted and need a break, or you or your family have health considerations that are more important than your business (but you need cash for those all-important medical bills). Selling your business may not always be a voluntary choice, but rest assured that is where a seasoned business broker can maximize the price, ensuring you get what your efforts or running your business for so long deserve.
Beginning the sales process
If you do reach that all-important decision to sell, however, do consider whether its practical to go it alone in conducting the sale. Professional business brokers have the know-how, contacts and experience to make the sales process simpler and, ultimately, more financially rewarding for you. If you feel that this could be the time to start the process of selling your business, or just need to chat about your options, contact Tom Culo today.