You’ve committed a significant chunk of your time, and maybe of your life, to your business. You’ll never know when the best time to sell is until after the fact. This uncertainty is enough to push many owners over the edge. Others continually delay putting their company on the market, hoping the market will continually rise. It won’t. Here’s how to live with the uncertainty and find the right time to sell your company. Here are the basic criteria you need to evaluate before putting your company on the market.
Is Your Business Ready to Sell?
Before looking at broader market factors, you need to take a close look at your business. Does it have a consistent history of growth, including relatively significant recent growth? Know what is standard for your industry, and then make sure your business exceeds it. Get your books in order so you can demonstrate objective growth to would-be buyers.
Know that significant growth often signals that the time to sell is now. Running a business is challenging, and the risks grow with your profits and growth. So consider selling as things are improving, rather than assuming they’ll continually improve. That’s rarely the case.
After you establish a positive growth trajectory, work with a valuation expert to establish an asking price.
Can Your Business Sell in the Current Market?
The market inevitably affects how attractive your business is. The most important factors are:
- How many businesses similar to your own are available right now.
- Whether sale prices are rising or falling.
- Whether strategic acquisitions are increasing or decreasing.
- Tax rates.
- Whether interests rates are rising or falling.
- Access to debt financing.
If there are relatively few businesses similar to your available, prices are high, and the tax climate is favorable, now may be the time to list your company.
Are You Ready to Walk Away?
Your emotional readiness to sell your business determines how much you invest in the sale, how committed you are to negotiations, and how happy you feel after your company sells. You need to know what you’re going to do after you leave—and how much those plans will cost. If you’re not sure whether you’re ready or you don’t have a plan, you could destroy the sale without even realizing that’s what you’re doing.
You must also ensure your business is prepared to run well in your absence. Do you have a strong management team in place? Have you hired the best possible employees for each role? Buyers are investing in your team, not just your brand, so reduce your business’s dependence on you.
Ultimately, there’s no single right time to sell. There’s a right time—or times—for you. Your goal should be to take an honest, unflinching look at your business. What works and what doesn’t? Then work with a professional advisory team to assign a value to your company and do everything you can to maintain or grow value in anticipation of a sale. Then get out while things are on the upswing.