When is the right time to sell your business?
Practically speaking, there is only one right time to sell your business.
Think about it; if you were on the hunt for a new business, what would you be looking for? Unless you were one of the exceptions to the rule and were looking for a business that you could turn around, much like flipping a property, the more probable case is that you would be looking for a business that is well-run, performs well in the market and shows signs of growth.
Clearly the right time to sell your business is when it is performing at its peak. However, this brings up the Catch-22 of selling your business. Very few owners want or even realize that the best time to sell their business is right when things seem to be going so well for them.
There are other stages to sell of course, the first being when the business is in decline, and the second when the business has levelled off and enjoys success across the long term, despite some ebbs and flows. However, these scenarios (especially when your business is in decline) are unlikely to guarantee you the best price for your business.
Assuming your business is on the up-and-up, where growth is forecast and there are opportunities to expand, there are some other ways to gauge whether to sell.
- Your dedication is waning. Despite the obvious growth of your business, has your passion for your work been replaced be sheer exhaustion, or alternatively, boredom? Running a business, but especially a small business, comes with financial stresses, high levels of uncertainty, long hours, multiple responsibilities and a blurring of boundaries where you rarely clock off at five. If you no longer enjoy running your business and it is in a healthy stage of growth, selling may be a good option.
- You can’t afford to grow further. Your business may have grown to a point where to get to the next stage of growth will involve significant financial and human investment. You may simply not have access to this sort of financial and staff leverage, which is where merging with a larger company can help.
- Your risk profile has changed. The risks and stresses of growing a business mean different things to a childless professional than to someone with more responsibilities, such as a mortgage and children. You may decide that the risks associated with owning your own business are outweighed by your need for better stability in your financial and personal life.
- The business no longer needs you. This may be a hard pill to swallow, but individuals have their own skills, and yours may no longer be required in your business. For instance, you may have started your own business because you are a fantastic sales person, allowing you to focus on establishing investment and a strong customer base in your business. However, it may have reached a point where the business attracts investment rather than seeks it, and your primary skills are no longer needed. You may want to start a new business to channel those skills, rather than have them wasted.
- You face a brick wall. There may be foreseeable changes to your industry that you don’t want to have to face, such as disrupting technologies. A common approach for businesses facing changes in how their customers interact with their product and their competition is to diversify their business. The only option your business may have to guarantee growth in a changing environment may be with a different owner, with greater resources available to them.