People typically start businesses for one of four major reasons:
- For the lifestyle
- For the money (they hope to make when they eventually sell)
- As a legacy and for posterity
- To change the world
Regardless of the reason for setting out to establish a business, a fair number of people eventually wind up thinking of selling. And the question of when should you sell a business inevitably comes up.
Is there such a thing as the right time to sell a small business? Let’s dive deep to find out.
The Right Time to Sell Your Business
In order to effectively answer the question of when to sell a small business, we’re going to split our answer into two: personal reasons and business reasons.
It’s the right time to sell your business if:
- Your health is failing and you can’t keep up with the day-to-day requirements of running the company.
- You’re ready for retirement and can no longer envision the future of the business with you in it.
- You’re burnout and don’t have the drive to implement new strategies and seek out innovative ways to beat the competition.
- You’re bored, no longer excited by the work, and you want to tackle something new.
- Your marital situation has changed and you’re being forced by legal action to divest.
It’s also a prime time to sell your small business if:
- The business has grown beyond your expectations and the growth doesn’t match up with the lifestyle you want and you can’t keep up.
- Your industry is growing more obsolete with each passing day and there is no viable way to save it and you don’t have the energy to re-invent the business.
- You’ve been offered a partnership or merger or acquisition opportunity.
- You’re keen to explore new and different markets.
Great, now that you know when to sell a small business, let’s talk about timing the sale. This is key as it can affect how much you get after you’ve signed the dotted line.
How to Time the Sale of Your Business
Timing is everything when seeking to maximize business sale value.
One of the best times to cash out is when the business is at its peak. When it is doing well and is making money. When you’ve got a solid client base and can prove its profitability to prospective buyers. Your best offers will probably come when your business is in this state.
So, if your business doesn’t quite match this description, you might want to hold off selling until you can:
- Gain more market share
- Improve your customer base
- Increase profits
- Bolster reputation
- Boost financial position
In a nutshell, wait until you get the business to a relatively healthy state.
With that said, however, it must be highlighted that this is the ideal and things don’t always go as planned. Simply because no one can predict the future.
That’s why if your exit plan is selling you must begin your preparations years in advance. If you’re truly pressed – take at least one full year to get your papers in order before you list the business. And keep a close watch on what’s happening in the industry observing trends and changes.
Times to Avoid Selling Your Business
So, is there a wrong time to sell your business?
We’ve seen how timing can affect the quality of offers you receive. Generally, you will want to avoid selling your small business:
- During times of economic instability
- When the economy is in distress
- When getting access to funding is difficult
- When your industry is about to be hit by a tax rise and,
- When there is a decline in trade because of international politics
Knowing when you should sell a business and when not to can make all the difference in your preparation and selling experience.
Get the Help You Need
If you’re thinking of selling your business and require the services of a seasoned M&A professional, our Sun Acquisitions team is ready to sit down with you to discuss the process.
Contact us today.
Looking for more insight on selling a business? Check out these links:
- Mitigating Post-Closing Risks Through The Rep and Warranty Insurance
- How to Navigate a Buyer or Seller’s Initial Meeting
- Are You Financially Ready to Sell?
- Buyer Motivation – How to Confirm?
- Sell NOW – The Crystal Ball is Pretty Clear
Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.