Timing is everything. That age-old adage is never truer than while you’re considering when to sell a business. Timing is one of the most critical factors in the succession game—timing as it pertains to you, the business owner, and to the company you’ve created and built.
Is it the right time to sell for you, and is it the right time for your company?
There are many reasons that factor in when to sell a business. Maybe you’re looking for new opportunities or business ventures. Perhaps you no longer have the time to devote to the business, or you’ve realized that you are no longer the right person to bring your company to the next level. Maybe you’re nearing retirement and would like to spend more time with family. Or perhaps there are other personal or external reasons motivating you.
It’s also important to keep in mind that nobody can run their business forever, and at some point, everyone will need to exit. You want to ensure that you have the appropriate plan in place.
Whatever the reason, it’s essential to ensure that you are ready to take the next step. You’ve worked hard and spent years creating and building your business. As the owner, you must ask yourself: are you comfortable handing the reins to someone else? Will you have any remorse once you successfully sell the business? Do you know what is next on the horizon for you?
Only you can honestly answer these questions, and it’s important to spend some time considering what selling your company will mean for you and your future. You must be fully committed to selling.
Timing: Your Business
Once you feel ready to move forward with the significant decision to sell, there are a number of other factors that will—and should—influence your choice of when to sell a business. The “when to sell” is different for every entrepreneur, and for every company.
There are several considerations that can help guide you to ensure that your company is in the best position to sell—and in a position to maximize your outcome. These elements are not all fundamental, but they can help to establish an understanding of what your optimal position may be, now or in the future.
1. The company is in a growth phase.
In order to get the best price for your business, it’s important to ensure your business is in a phase of growth—that it’s neither plateauing nor declining. Ideally, you want to establish that your business’ recent performance is strong enough to attract a buyer and sell at a favorable price. Future revenue projections should be good, and there should be a historical upward pattern of growth.
In sum, people might ask you, “Why on earth are you selling now?” So, why are you? Because it's better to sell too early than too late. You’re selling now because your business—and the market—are in the most favorable position to do so.
2. You’re not selling from a negative place.
If it’s possible, you want to ensure you aren’t selling from a desperate position. Doing so will likely mean you won’t be in a good negotiating position. You’ll face more limitations (in terms of types of offers), you’ll feel rushed to complete a sale, and ultimately you will likely forgo the true value of the business. In most cases, you may be better off restructuring or refocusing your company, and revisiting the idea of a sale when conditions are more optimal.
It’s critical to have your overall general business activities in good shape: business records, tax returns, and outstanding liabilities should all be up to date, and you should have a clear understanding of and realistic expectations about the value of your business. In short, all your ducks should be in a row. Doing so will make the selling process much easier for you, and you’ll have a higher rate of success.
4. Economic conditions are favorable.
Economic conditions are generally outside of your realm of control, but ideally, market and industry trends should be positive, and the current outlook for your business, your industry, and the geographical region you serve should be good.
What if I’m not ready? What are my other options?
Selling your business outright isn’t always the best option, and it’s important to consider all avenues and opportunities that may be available to you. Perhaps you may decide to sell a portion of the business, giving you more cash flow or the opportunity to refocus the direction of your company.
For instance, stepping down from a leadership position and finding a new CEO to replace you may ring truer to you—you’d still own a portion of the business, but could take a step back to put your energies elsewhere. Or maybe your business has served its purpose, and now it’s time to move on.
Deciding to sell a business is one of the most important decisions a business owner makes in their career and is not something to be rushed. Reflecting on your reasons to sell—and making sure the time is right for you and your company—are important first steps. Doing so will help you define your goals more clearly and give you direction as you embark on the sale of your company.