Timing Your Business Sale
Timing your business sale can make a huge difference is creating a successful outcome. As they say, timing is everything. When it comes to selling your business, take the necessary steps for optimal success when considering making this major financial transaction.
Let’s explore the factors that impact the timing of a business sale. Owners must consider if their business model and industry conditions can support its sale, as well as why larger firms may be more difficult to sell and how a broker can help guide you through this process.
Timing Your Business Sale: Feasibility
Consider whether or not you currently possess a viable business model and whether or not you intend on continuing managing the company according to it. Successful retailers typically devote an immense amount of time and energy to hiring, managing, and replacing workers – not to mention dealing with high employee turnover rates.
As with any business venture, both types present their owners with challenges that they must accept or face the option of selling the business outright. Timing can have a dramatic impact on the sales proceeds that you receive from a sale. Timing is key!
In order to sell your business successfully, you will need to carefully plan improvements, gather documents, market it effectively, and negotiate with potential buyers – this process may take up to a year and require considerable time and working capital investment.
Your plan may involve setting an expected date to sell your business based on meeting a particular sales goal or reaching an age threshold.
Timing Your Business Sale: The Influence of Events
Motivated buyer: If a potential buyer shows keen interest in purchasing your company and is willing to pay top dollar, it would be wise to take advantage of the offer and sell at an attractive price in order to maximize dollars gained; otherwise you risk missing out on opportunities with other potential buyers who could offer more.
Industry Changes: Shifts in your industry may either increase or decrease interest in your business. When consumers increase online purchases rapidly, retailers with strong presence online become even more valuable, potentially receiving purchase offers from buyers interested in what you offer.
Economic Conditions: Buyers tend to take more risks when the economy is on an upswing; when things slow down, their willingness to purchase businesses drops dramatically and sellers find themselves at a distinct disadvantage.
In order to achieve an attractive sale price for your business, it may be beneficial to start the selling process sooner than planned. If an event negatively affects the industry or economy, buyers could lose interest quickly.
Considerations must also be given to the size and complexity of your business when making the decision to sell it.
Timing Your Business Sale: Company Size
Larger businesses can be more challenging to sell; due diligence processes take more time and more money must be invested by potential buyers. A larger firm also faces greater legal exposure due to employees, customers, vendors and regulators all having greater involvement.
Effectively managing a large business requires talented people. As your business expands, finding and cultivating qualified staff becomes essential – the cost may be substantial so prospective buyers must justify maintaining a qualified management team.
Your decision to sell may, and often will, come down to personal considerations.
Timing Your Business Sale: Business Seller’s Goals
Owners must be passionate about what they do in order to thrive as business owners. Growing a business takes much effort, time, and commitment from you as an entrepreneur; whether this passion still remains strong is up for discussion – or should another change be implemented?
As your business expands, additional capital may be necessary for purchasing assets and hiring skilled individuals. Larger firms typically raise this capital through issuing stock or borrowing large sums of money; you must decide if you are comfortable managing expectations of shareholders and creditors as your firm expands; some owners opt to sell the business to someone more qualified.
Entrepreneurs may take out second mortgages or liquidate retirement plans in order to start a business, forgoing income and benefits provided through traditional employment, while possibly forgoing their full salary for some time after starting up a company. Is operating your business still costing financially, or would selling and investing its proceeds be more suitable now?
An experienced business broker can assist in making informed decisions when selling a business.
Timing Your Business Sale: Business Brokers
Business brokers understand both industry-specific and economic trends that impact the timing of sales transactions, so their expertise can assist you when market conditions shift.
Brokers provide valuable guidance and expertise for increasing the value of a business to maximize value. Utilizing industry expertise and marketing tactics, business brokers will locate qualified buyers for sellers. A knowledgeable broker understands your market well enough to educate potential buyers as to why your company may be desirable.
Once you find an interested buyer, a broker can ensure the due diligence process runs smoothly, answer questions about it, and increase its likelihood of closing successfully.
Brokers serve as an impartial mediator between buyer and seller, helping ensure no money is left on the table by either party. By helping ensure maximum return for your business sale, brokers help ensure all potential profit is captured from every deal.
We focus on business owners’ needs and provide the best advice about the local market, specific industry, and whether the readiness of the business for sale. Our goal is to help our sellers understand their opportunities for a successful sale and how to maximize their business value.
We know how hard our clients work in their businesses and so when the time comes to let it go, we want to partner with you to realistically achieve the maximum value that for all your hard work. Contact us — let’s start a conversation about how we can help.