When Is the Right Time To Sell Your Business
Thursday, October 08 2020
As an entrepreneur, one of the biggest and most difficult decisions you will need to make is when it’s right to sell your business. There are numerous reasons why you need to sell a business, many you have no control over. It maybe you feel overwhelmed, bored, need a new strategy, need to liquidate your assets, divorce or even ill health.
It doesn’t really matter what has prompted you to make the decision, it’s the timing that can have the biggest impact on the price you get for your business. Sale price is connected to past profits and performance, so it’s vital you take that into account when trying to figure out what the right time is to put your business on the market.
After Decreases in Performance and Profits
One of the most challenging times you will face, if it happens to you, as a business owner is when your business is not doing as well. It maybe it starts to perform poorly and that saps your energy and motivation and you just don’t have that drive to push it to success again.
This is very common. The issue is, as we alluded to at the opening, a decrease in performance and profits means a decrease in sales price. If you face these kinds of problems, therefore, you need to consider whether or not you could continue running the business and increase the profits as that will increase the sales price.
It may be if you are facing a new business rival and are not likely to recover from the drop, then you need to assess with an objective and open mind, whether you are raise the business to the way it was before or if things are only going to get worse if you continue.
When Performance Levels are Maintained, but Profits Fluctuate
In the above scenario, the sales prices can be calculated from the last 3 to 5 years of average profit, as prospective buyers will be able to see the consistency with which your business has performed over a long period. You need to take care, though, to not have a false sense of security. You need to continue working on your business even after it is put on the market.
The sales process can take some time. The last thing you want, therefore, is to lose that sales advantage you have by not continuing to work on your business because you feel its drawing to a close.
Increasing Profits and Performance
A business that has growth will always sell for a higher price and quicker than others because potential buyers will want to take advantage of the future market success your business is capable of achieving. The problem is that most business owners don’t really want to sell up when their business is successful. Understandably, as you’ve put all that time, effort and money in to growing your business and when it is finally paying dividends, you want to enjoy the success.
That being said, as buyers are likely to pay out more for a business with rising profits, its during periods of growth that you should assess whether it is the right time to sell up or not. Ask yourself, would you still want to keep the business if it was experiencing declining profits?
As a business owner, you need to weigh up all of the above and decide when it’s time for a change and to cut your losses or make the most of your gains. There are many other times when it might be right to sell up, too, though. If you are not enjoying running the business anymore, if it has outgrown your skills or there are no threats to your performance and profits on the horizon.
What’s right for one business may not be right for another. So, you need to think carefully. We hope our suggestions help.