When To Sell Your Business
After spending years managing your business, there comes a moment when you know that it’s time to put the for sale sign up. You may have planned the timing, or maybe you were inspired by other interests or just realized you were done owning the business. Whatever catalyzed your decision to sell, what matters is knowing when to sell your business.
Timing is everything. Timing in business sales can make a big difference in terms of emphasizing success and minimizing failure points. Knowing when to sell your business, and being prepared for the process enables and empowers business sellers to grab the bull by the horns to manage the sales process to their benefit.
Is Your Business Ready to Sell?
The best time to sell your business is when your business is consistently profitable and the market conditions are favorable for your industry.
Business buyers want to sell stable earnings and growth. Selling when your financials are healthy is ideal. Buyers tend to avoid buying start-ups and underperforming businesses given the greater risks. When your business shows stable earnings and, even better, growth, then your timing is ideal.
Another timing factor for when to sell your business, is determining the market conditions for your industry. During the height of the pandemic, selling restaurants was a challenge because of the massive impact on eateries. Yet, fast food and take-out establishments were selling consistently at pre-pandemic numbers. Knowing your industry trends and market forces will also help you optimize your business sale.
Knowledgable business brokers can also help you understand your industry trends in terms of market conditions. Business brokers can tell you how the market is for your industry. They will look at business sale trends, how many businesses like yours have sold recently, how many comparable businesses are on the market, purchase price multiples (higher the better), and the ease of financing.
Are You Ready To Sell Your Business?
When to sell your business depends on different signals for the business owner to time it right. Timing the transaction depends on your readiness to sell your business. If you time it too soon, you may undermine the sales process because of your ambivalence. Time it too late and you may sabotage your efforts due to burn-out. Optimally, you want to make your decision to sell your business without doubt in order to prepare yourself and your business for the sales process to achieve your personal and financial goals.
An Unsolicited Buyer Offers To Buy Your Business
Buyers often approach business owners with offers to purchase their business. The offer might come from a larger company or a competitor that wants to merge your company with theirs. This type of buyer is usually pretty motivated and if you are considering selling or ready to go, this can be a stellar opportunity to help you meet your goals.
Business Owner Burnout
While the daily grind of owning a business can damper a business owner’s motivation of business ownership on occasion, business ownership burnout can lead to chronic stress and business decline if the owner is not careful.
When owning a business becomes a pain, then it is time to sell. It simply does not serve the business owner to hold onto the business once they’ve hit irreversible burn-out. Holding onto a business post-burn-out can be detrimental to the employees, financials, customers and family members. If the owner holds on too long, then business decline may occur which then hinders a business sale because the business becomes unappealing and considered more of a risky investment.
Lagging Behind Industry Trends
Businesses that don’t keep up with industry trends risk becoming obsolete. Old business models that are not updated with new technologies and trends will see their competitors gain their market share. Failing to invest in your business to keep up with industry trends affects the bottom line which in turn affects the desirability of the business to business buyers. When this happens, it might be too late to sell.
The Business Is Peaking
The ideal time to sell a business is when it is doing really well. A high business valuation means a great return on investment for business buyers. It also means lower risk because of strong earnings. Strong financials also means that it will be easier for buyers to finance the business acquisition.
Business Owner’s Interests Change
When a business owner’s change and they no longer find the business as intriguing as when they first started, it’s a good time to sell. If the owner finds themselves bored or frequently distracted or excited by other possibilities, then their attention should be redirected. Selling the business can provide the owner with the necessary capital to pursue new interests.
Tragedy
When a business owner suffers challenging personal setbacks, it may be time to sell when they find it difficult to manage their business due to their personal circumstances. Death, divorce, disability and other hardships can make it difficult to run a business optimally or may force the business owner to sell. Selling under these difficulties can alleviate the owner’s burden and provide the capital they need to cope with the challenges they face.
Longing for Retirement
Finding yourself dreaming about playing on a beach or endless afternoons enjoying pastimes? It might be time to retire and when to sell your business. At some point, the promises of retirement – freedom, time with family, travel will become more attractive than operating a business.
Once you decide that you are ready to plan for retirement, begin preparing when to sell your business. Get a business valuation to understand your business’ worth. You want to make sure that you time your business exit so that you can secure all the resources that you will need to comfortably enjoy your retirement.
When NOT to sell Your Business
While you may be ready to sell your business, you should also know when to wait or delay the sale.
When to sell your business also needs to take into consider less optimal times.
- Avoid selling your business if you are really happy owning your business. If you still love your work and feel fulfilled, then maybe there is no need to sell just yet. Feeling fulfilled with your work is very satisfying and may not be easy to replicate elsewhere. If you don’t need to move, or make a lifestyle or professional change, then consider staying put and delaying the sale until you are actually ready.
- Avoid selling during a downturn in the market. Your business value is connected to the broader market within which it operates. Look to sell when market forces are good to increase your chances of the business selling and at the price you seek. Moreover, financing the business sale is much easier when the market is humming.
- Avoid selling to a bad buyer. If you care about the legacy of your business, do your due diligence for any potential buyer to assure that the right buyer is buying your business. You also want to assure that the buyer will be able to close the deal and avoid wasting time with flaky buyers who will prolong the sales process.
Are You Personally Ready to Sell?
Every business owner contemplating selling their business needs to take a moment to self-reflect on their personal readiness to sell. If they have new opportunities around the bend and are excited about what the future brings post-sale, then they are ready to go. If they are unsure and ambivalent, then they will need to do some soul-searching to determine the reasons for their conflicting interests.
Business owners need to ask themselves whether they can see themselves operating the business for another few years, whether they are motivated to keep up with industry trends and if they want to keep up with the skills needed to maintain a successful business. They also need to consider their long-term goals, interests, passions, family preferences and overall attitude to continued business ownership.
Whatever your circumstances, assure the decision to sell your business aligns with your personal goals, and provides you with enough revenue to attain those goals. It’s never too early to contemplate these questions and consider what you want and need to live your best life post-business ownership.
