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When Is The Right Time To Sell Your Business?

When Is The Right Time To Sell Your Business?

Is your geographical area or industry growing or experiencing a boom? That’s a great sign that it’s time to sell. Many people wait until they are exhausted and ready to retire or their business is on the decline to sell. Ideally, that's the exact opposite of what you should do. You want to sell when you are at the top of your game – peaked out. Some will say, 'I'm making good money now. Why should I sell?' That's thinking like a business owner, not an entrepreneur. Below we will discuss 5 situations that would suggest that now is the time to think about your exit strategy. 

1) Your Business Is Performing Well

Your business is at the top of its game. You are making more money than ever and operations are running smoothly. It’s time to set the cruise control, and just ride this wave of success, right? Maybe, but not necessarily. The absolute best time to sell a business is when the business is doing well, and when it has been doing well consistently for the past few years. Buyers want to see a solid track record of good owner benefit. When valuing a business, we typically look at the last 3 years of financial records, but a buyer will often request to see the last 3-5 years during Due Diligence. If you are an entrepreneur who likes to move from one project to the next, you know there is no better time to sell than while you are on top. Anything unexpected can happen to a business, which could possibly drag it down, so that’s why cashing out while things are good can be the best thing a business owner could do, especially if you are thinking of getting out in the near future. 

2) You Are Preparing For Retirement

If you are starting to think about retirement, and how nice it would be to have the freedom to enjoy this next chapter of your life, just those thoughts alone should be enough to start exploring your options for an exit strategy. So many hopeful retirees that come to us for assistance to sell their businesses are tired, burnt out, and have waited too long to pull the trigger. In some of these cases, they have taken their foot off the gas, and the business profits have slowly been declining year after year, which in turn, makes the eventual sales price of their business lower. The business owners who approach us early, maybe a year or two before they are ready to retire, end up being in a much better position when it comes time to sell. We help them optimize and prepare their business for sale, which then gets them top-dollar for their business from a buyer. 

3) You Have Health Concerns

Unfortunately, we see this scenario more often than we would like. A business owner has received some bad news relating to their health, and they need to concentrate on getting better, rather than running their business. This is a tough one, because you don’t want to jump the gun and list the business for sale before you even know what you are really dealing with, in terms of the illness or injury. However, the worst-case scenario would be waiting too long, until you can’t run the business any longer, and you are forced to close the doors, rather than sell and get rewarded for all of the hard work you’ve put into your business. A medical situation that we have repeatedly seen is a business owner with either a high-stress or physically demanding business, being advised to make changes by their doctor. In those cases, we can sell their current business, and then, if they want to continue working, we have helped them purchase a business that is more “hands off” or less demanding. If you have questions about selling due to a medical reason, we are here to help during this challenging time. 

4) Your Geographical Area Is Growing or Your Industry Is Experiencing A Boom

Much like selling when your business is performing well, another good time to sell your business is when your location is growing or your industry is hot. If your geographical area is experiencing tremendous growth, then it shows that the area is prospering. More people to the area signifies a healthy local economy, which is of course good news for local businesses.  This should mean more customers, more sales, and a higher bottom line in owner benefit. This should be the perfect recipe to attract a quality buyer at top dollar. If your particular industry is experiencing a boom, then now is the perfect time to think about selling. As with any wave, you can only ride it for so long, before it breaks and crashes. Ideally, you would want to be able to sell your business before that happens. The last thing you want is to be selling the equivalent of a video rental retail store in the age of Netflix and digital rentals. A booming industry also attracts more buyers, so your chances of actually selling your business are much higher.

5) Your Business Is Suffering

If your business is suffering, you might want to think about selling up and getting out, before it’s too late. The truth is that you do still have a chance of selling, even if your business is not doing well or if you are losing money, especially if you have equipment that is valuable. Furthermore, there are some buyers out there who actively look for struggling businesses to purchase and rejuvenate. It seems obvious to say here, but if your business is suffering, do your very best not to “check out” and make sure you fully concentrate on keeping your business afloat for as long as you can. The average small business takes about 280 days to sell, so give your Business Broker a fighting chance to sell it for you. Don’t wait until the last minute to list it, because if you only have a few months left before you are forced to close the doors, chances are you might not be able to sell in time. If your gut or your bank account balance is telling you that it’s time to abandon ship, get your business on the market as soon as you possibly can. A qualified Business Broker can assess your situation and give you their honest opinion. 

If you've spent years, maybe even a lifetime, building a small business and are starting to think about retiring, cashing out, or changing paths, now may be a good time to sell up. Only you can decide whether or not now is the right time for you to sell. If you’d like to speak with us about your options, we’d be happy to chat with you. The most important thing is to engage with us early on, so that we can partner with you to create the ideal exit strategy.