When is the best time to sell your business? Many business owners do not think about this for the first 10 years of their business’s operation. Many business owners start to consider retiring later on in life and are looking for an exit strategy. Other business owners we work with are looking to change careers or are simply bored with their work. You may be asking when is the right time to sell my business. Below we’ve compiled a list of timely factors that impact the sale of your business.
Below are a few factors that affect the timeframe in which you should consider selling your business.
This is the most important factor in the best time to sell your business. You should sell your business when you are ready to. Many business owners are ready to sell their business and transition to retirement. A motivated seller allows us to sell your business fast and helps the whole selling process to move smoothly. There are many emotions involved with selling a business, and you need to be prepared for it. If you still love what you do and do not want to leave the business, you can wait to sell your business.
Another option, if you still love your business, you can sell your business while remaining at your company as an employee or figurehead. We have seen this done well, and it can lead to an extremely successful business transition.
If your business is making maximum profits and continuing to grow, this is a great time to sell your company. A business that is growing and seeing success is sought after by many buyers. Not only will it be easier to sell your business, but you will also make a large amount of profit from the sale of your business.
Businesses are typically more profitable during an economic upturn. When the economy is good, it is a great time to sell your business. More buyers are available with the finances to purchase your business. Your business is likely reaping the natural benefits of a good economy, and you are likely to make more in gross profits from the sale of your business. Presently it is a great time to sell your business.
A great reason to sell your business is if you are tired of the work, tired of the company, or just plain tired of the business. To remain at your company while you are not invested in it will probably lead to a drop in profits or the company failing as a whole. It is best to sell your business before your attitude brings about its ruin. This will also make sure the years you have spent building your business and investing countless hours into your company’s growth will not be wasted. If you are tired of your company, the best time to sell your business is now.
Many business owners make an exit strategy or exit plan for their company. Essentially they make a 5-10 year plan on goals and steps to work towards selling their business. Once those goals are complete, their business is ready to sell. Many business owners will go through a timeframe where they are focused on increasing the value of their business before selling it. There are many ways to increase the value of your business before selling it, but if you are already fully invested in your business and its growth, you are probably already doing these.
Some business owners know it is time to sell their business due to personal reasons. While the timing of selling your business might seem unfortunate due to the nature of personal reasons, it is sometimes better to remove yourself from the company and business altogether. Letting your personal life or things that happened at your business affect your company can harm sales.
If you own a business, you may have thought about when would be the best time to sell your company. There are many factors to consider when deciding on the right time for the sale of your business. First, let’s discuss when not to sell. If you love what you are doing, the business is doing well, and you are not considering exiting the company for at least five years, you are probably better off continuing to do what you are doing. However, if you are considering exiting your business in the next few years, then you should probably consider what the best time might be to sell your company. We’ll list some of the factors for considering when to start the process of selling your company.
1. Revenue & Net Income TrendsYour business’s revenue and net income play a huge factor in when you should sell your business. Your business’s revenue trend and the market as a whole can sway the value of your business. Learn more below:
a. Businesses are usually priced based on a multiple of their net income. Buyers prefer to buy companies that have sales and net income that is increasing and somewhat predictable. They will pay more for businesses that have positive trends like this. As a business owner, you know that you can’t predict precisely what the future will be, but you can have an idea based on your pipeline and the trend of what your business has been. Buyers will also decide on this by looking at your financial patterns to see whether your business looks like it will continue to grow based on your history and pipeline. So ideally, you will sell when the company is doing well, and you can get the most for your business.
b. If your business is on a downward trend, you need to assess whether you can turn the company around and try to sell for a higher valuation or believe the business will continue to go down. You can try to sell it to someone else that can turn the company around. Are there new ideas you have to turn it around, or do you have a large customer that you might get? If you think things will turn around, then you would be better off waiting until they do.
c. If the revenue and net income of the business is pretty stable and will seem to continue that way, then it’s also a fine time to sell the company if you want to sell for other reasons, which we’ll discuss.
Maybe at an earlier time, you liked the work of running your business, but at some point, it may have become routine and boring to you. When they are doing something they don’t like, most people usually don’t do as good of a job. If you continue going along this way, the business may suffer, and the company’s value may decline. If you are no longer enjoying the work you are doing, it may be time to sell your business.
If you don’t enjoy running the business, then you have some options to consider. Do you trust that one of your employees might be capable of doing the things that you don’t like doing and do them well enough to have the business continue to run well? Hiring someone from the outside is also a possibility, but that may have more risks and may take additional time to train them so that you feel comfortable that they can do the job.
Depending on when you are thinking of retiring and your financial needs, these are some options to consider when deciding whether to restructure your role in the business or sell the company.
The reason for selling your company will factor into how much money you will need from the sale of your company. If you are going to retire, you will need to get enough money from the sale of your company to retire, considering your lifestyle and other income from investments or other sources. A professional valuation from an experienced M&A firm or Business Broker will help you in determining this. Once you have that, you can consider how much money you will get after taxes and whether that will be enough.
If you plan on working at another business or have other things that you will be doing to earn money, then you may not need as much, and other factors such as doing what you enjoy or another opportunity may come into play as to when to sell your company.
When selling your business, there is usually an overlap or transition period where you remain at the business as it passes on to the purchaser. If you want to be fully retired soon, then now is the time to sell your business. If your business requires a larger transition period because of how involved with your business you are, you should consider selling your business soon.
In almost all cases, you will need to stay on after the sale of your business to help a new owner learn the business. They’ll need to understand your products and services, employees, customers, and business processes. The length of time you will stay on can vary from as little as a few days to as long as five years or more. Whether or not you have a buyer from your industry will make a difference in how long a transition period will be needed. Other things that can influence the length of the transition are:
Relationships and knowledge take time to transfer. Some sellers like to stay on after the sale because they can often do the things they like and are good at, and the new buyer can do some of the other things they don’t want to do. Also, you can cash out the value of your ownership and let the new buyer worry about the business’s success.
Other sellers don’t want to provide an extended transition period. If this is the case, you want to have a buyer from your industry and have your staff trained to do the work you do and develop and maintain important customer relationships. In some cases, a buyer from outside the industry may pay more, so if you are open to various time frames for a transition, this can widen your options for buyers that could get you a higher price. You can read more on Transition Periods.
The amount of time it will take to sell your company plays a major factor in determining when you should sell your business. Typically a business takes a few months to a few years to sell. A business sale is not a quick process. Take into consideration the length of time it will take to sell your business. If you start the process of selling your business when you are sick of your company and ready to leave immediately, you are going to have to remain with your business for a while longer. Make sure you take the length of time it takes to sell your business into consideration.
Companies can sometimes be sold quickly in only a couple of months or take a year or more. How aggressively you want to price your business will be one factor, but there are many others. You can read more about the factors that go into how long it takes to sell a company.
6. When should I begin the process of selling my company?When should you sell your business? We recommend, on average, beginning the process to sell your company within 1 to 2 1/2 years from the time you would like to exit your company after providing a transition. In most cases, this will give you enough time to sell the business and finish your transition period with the buyer. However, it’s best to discuss the specifics with a Business Broker or M&A firm that has experience selling companies in your industry. They will advise you on what buyers typically expect for a transition period, given your role in the company and your industry. They can also provide you with a potential selling price and an estimate of how long it will take to sell your company at the amount that you desire.
Technically you can sell your company at any time. Knowing when to sell your business brings in the above factors while also considering the effectiveness of selling your business. If you just got through a difficult year where your business was not as profitable, you might want to sell it in a year that it is more profitable. Getting a free consultation with us will help you determine when the most effective time is to sell your business.
Determining when you should sell your business is difficult. The examples listed above all have a lot of emotion involved. As the owner and leader of your business, deciding to step down and sell your business is probably the most difficult decision you have ever made. When you choose to sell your business, it requires you to believe it will succeed without you. With so many emotions involved in a business sale, it is important to have a business broker help manage the sale. This will make sure you make the maximum profit from the sale of your business.
While there are no hard and fast rules (because there are exceptions to every rule), there are times when generally speaking you shouldn’t sell your business. If you are happy with your company and want to remain there while foreseeing it continuing to grow, by all means, continue doing a great job! If you are losing interest or aren’t feeling invested in your company, you should consider selling. A disinterested business owner will lead your business to drop in sales and growth. This will lower the overall value of your company. Learn the times you should not sell your company below:
If the economy is in a downturn, and your business is no longer profitable, there will be fewer available buyers, and the available buyers will bid low on your business if at all. If your business sees a drop in profits when the economy is in a downward spiral then that’s a tough time to sell. This can also impact the listing price of your business based on the business valuation. Sometimes an economic downturn can be a great time to sell your business. If your business is growing, competitors may seek to acquire your company to keep theirs from failing. A business broker can help advise you on the best time to sell your business.
This may or may not be a reason to sell your business. If profits decline, it will lower the value of your business. If profits are declining, it might show that your business requires new ownership. A drop in profits is not a full indicator that you should not sell your business. Simply, the drop in profits will lead to your business selling for less. A drop in profits could indicate you need to sell your business before the trend continues.
If you want to remain running your business until you physically can’t anymore, you should continue to do what you love. It is helpful to have a succession plan in place in case something unforeseen happens such as health issues or other challenges.
Synergy Business Brokers provides a confidential consultation. We will discuss the specifics of your business and your goals both in terms of price and when you want to exit the company. Together we’ll work out a strategy to help you achieve your goals to find the right buyer that you feel comfortable taking over your business and get you a price that will allow you to retire or pursue other things in life. We only get paid if we sell your company, so we’ll also let you know if we don’t think we can achieve your goals, and it may be better to hold on to your business until the timing is right for you, given the financial considerations.
We specialize in selling companies with annual net incomes of $250,000 to $7 Million in construction, technology, manufacturing, distribution, healthcare, and services. If you own a company that meets these criteria, please fill out our online form, and an M&A Broker will follow up with you for a confidential discussion. For more articles, you can visit our blog.
If you are ready to sell your business, contact Synergy Business Brokers. We provide a free, confidential consultation and no fee until your business is sold. We are located in the United States and have sold businesses in over half of the US from states in the northeast like New York, Massachusetts, Connecticut, New Jersey, and Pennsylvania to states in the south like Texas, Tennessee, and Louisiana. Contact Synergy Business Brokers to sell your business locally, nationally, or to an international audience.
