If you are selling a business, timing is extremely important. But is there a best time of year to sell a business? Answer: it depends. Although the calendar can sometimes prove to be irrelevant, remember that selling a business is a process and different times of the year can have effects on the phases of that process. In this article, we will take a look at three, high-level phases of the process: preparation, marketing, and closing- and examine how the time of the year may or may not play a role.
Preparation means something different for every company and owner. In general, however, it includes preparing historical financials, gaining knowledge around tax matters, refining management responsibilities, formalizing loose ends that exist in every small-to-medium sized business, and more.
Even for the most organized business owners, these tasks often take longer than planned. While it is true that not everything related to timing is within a seller’s control, preparation is. So like planning for any major event, you’ll want to take on these tasks proactively to avoid potential delays in launching the business during the ideal market windows (more on this below).
When marketing a business, it is all about getting the most amount of buyer eyeballs to perform an initial review of the opportunity. So in order to do so, one must think from the buyer’s perspective and consider when they are most likely to be motivated to pursue an acquisition.
Generally speaking, at the beginning of the year and throughout the first quarter, buyers have a newfound sense of optimism based on aspirational plans for the year ahead. A similar scene resurfaces between Labor Day and Thanksgiving as buyers are typically back from the summer holidays and their attention is fully locked into getting a deal done.
Conversely, slower seasons tend to be summers due to kids being out of school and vacations; as well as the holiday season, which is filled with personal commitments and distractions. Assuming that your business is otherwise sufficiently prepared for the market, picking a more active time to launch can give you better odds of gaining initial traction and buyer interest.
To be clear, however, there is not actually a “bad” time of year to market a business that is prepared for the process. A high-quality business with organized documentation will raise eyebrows with buyers, no matter what the calendar says.
The best time of year to close on the sale is whenever all parties involved are ready to close. On one hand, electing to postpone a closing by a few days to wait for a month, quarter, or year-end for the sake of accounting convenience only leaves room for a plethora of unexpected disruptions. On the other hand, there may be legitimate tax advantages to either closing a sale before the end of a period or delaying closing until the start of the following period. Of course, however, the advantages must be weighed against the risks that populate as a result of delaying a closing.
Ultimately, closings happen as a result of meticulous preparation and strong marketing- it is therefore far more important to look towards optimizing those aspects because, without them, a closing won’t exist.
As you can see, an owner’s ability to succeed at achieving their objectives for a sale may depend largely on timing and even the dates on the calendar can make a difference. So when looking at your exit holistically, you must work backward from the closing and “reverse-engineer” the process to an optimal go-to-market timing and what amount of time you’ll need to sufficiently prepare.