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3 Signs It May Be Time to Sell Your Business

Posted by sb_admin on December 14, 2018
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It’s typical for owners to periodically contemplate selling their business. But how can you tell if it’s the right time to sell? The answer varies from company to company and is heavily dependent on the market. No matter the type of business you run or your motives for selling, there are three conditions that should be present for a sale to be a good idea.

There’s a Compelling Reason to Sell
Owners sell their businesses for many reasons—personal, financial, and strategic. There might be disagreements among co-workers, a looming retirement, or a sense of burnout. The owner might seek liquidity or want to minimize risk. Perhaps a new change in the market offers a compelling strategic reason to sell the company. Whatever the reason, it must be one you can clearly articulate to a buyer. Personal and financial reasons can devalue your company if they suggest to the buyer that the company is weak or that you’re desperate to sell.

You Have a Rational Expectation That the Sale Will Meet Your Financial Goals
Selling is a means to liquidity for most sellers. Many owners have a significant net worth, but most of it is tied to their business. Liquidity unlocks this equity, reduces risk, diversifies your portfolio, and offers ready access to cash.

If you pursue a partial exit, some other financial incentives may become important. For instance, in a recapitalization, you’ll maintain a minority stake in the business. This incentivizes you to continue to increase value while also diminishing your role and enjoying more free time.

Before you sell, you must have a clear estimation of value. The price of a business is in the eye of the beholder, and no greater than what the market will bear. That means you must find a buyer who sees the value you see. To do this, you must find ways to cultivate value well before the sale.

You Are Ready to Give Up Control
Your business can feel like your child. So you must be certain you are prepared to give up control. This concern is most pronounced among individual owners, particularly founders. It’s important to be mindful of the emotional dividends of ownership, such as self-esteem or feeling important to an industry.

For many owners, the emotional challenges of selling a business are the biggest challenges of all. Before putting your business on the market, you must be certain you are prepared to do so. Otherwise, your need to retain control can undermine negotiations, devalue your company, and ultimately cause a deal to go south.

If you’re thinking about selling, it’s important to be mindful of a number of factors. These metrics are not all-inclusive. Their presence does not necessarily mean a sale is the best choice. But their absence almost always means a sale is unwise.

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