So you’re selling a business. You know why you want to sell – but how about when? Choosing the right time to sell a business is crucial for maximising your profit while minimising the hassle. Thankfully, Daltons is here to help.
Selling a Business – 3 Key Factors
Identifying when to sell your business hinges on the reasons you want – or need – to sell it in the first place. You may have very strong motivations for selling, often influenced by factors beyond your control, in which case the time may be decided for you. However, you’ll be in the strongest position if you can: remain responsive to market conditions; mindful of your professional goals, and aware of any personal issues that may impede your sale. These three factors are key – let’s go step by step.
Performance
The way your business performs has a direct effect on the best time to sell a small business. Many people feel that a quick sale when profits are low and performance is in decline is the best time to offload a failing venture. However, the opposite is true, and working to make the business successful again is likely to offer much higher rewards when selling. Put yourself in the buyer’s position – would you rather climb aboard a sinking ship, or one that’s gaining ground?
The wider market conditions are important too. Check to see if your type of business is in demand. Even if profits are high and performance on the rise, a slow market might mean you should hang on until there is more demand. No one wants to sell a business quickly only to watch prices rise over the coming years.
On the flip-side, aggressive competition (such as large corporations) or disruptive technology (such as new apps or smart devices) require a much more responsive approach, and the best time to sell a business is always before it becomes completely unviable or unable to adapt to change.
Professional
So new challenges are on the horizon and it’s time to leave your old business behind. Professional motivations provide some of the most flexible options when selling a business. For instance, if you have a five-year professional plan, you may already know what and when the next step will begin. Alternatively, if you’re considering growth through qualifications or searching for employment, you can be more flexible about when you move on. Consider the broader market, and take the time to strengthen your position if you can.
Of course, sometimes preparation is not an option. If a lucrative business opportunity comes your way, then the quick sale of your business is in your best interests. Make sure you weigh up the pros and cons of any offer that comes your way before you commit to a quick sale.
Personal
Personal reasons for selling a business are often the most sensitive and time critical. Nobody wants to live their day-to-day working alongside a difficult business partner. Equally, turning up to work every day despite health issues can be personally destructive.
If you are selling for these kinds of reasons then sometimes it can be better to cut and run. The best time to sell your business is at a time when it can be least destructive to your family, health, or even state of mind. Selling quickly then, can often come as a relief despite a perceived loss of profit.
On the other hand, motivations such as retirement, or simply that you no longer enjoy the industry or area in which you are operating, provide a much more tangible time-frame in which to work. If you have a solid plan for the future, then you can probably afford to wait and get the best price for your business.
Knowing when to sell your business is a critical factor when placing it on the market. Put simply, time, patience, and professionalism will go a long way, and if you can stick it out to wait for the ideal moment, then you probably should. The same goes for a quick sale, if the time is right then don’t drag your feet, you might only end up losing profitability or even the opportunity entirely. Whatever you decide, following our checklist to success:
When Should I Sell My Business?
- Know your reasons – These can range from the personal and professional, or simply relate to the performance of your business. Identify your unique reasons and go from there.
- Build your business – If your business is underperforming, then it’s often worth putting in the extra effort to increase profitably and subsequently saleability.
- Research market conditions – Whether your business is profitable or losing money, knowing the market conditions will give you a much better understanding of its current value and whether it’s the right time to sell.
- Be responsive – When selling a business, being responsive to a slew of outside factors is key. Make sure you are either patient enough to wait for the best price, or sharp enough to sell quickly when the time is right.
- Know when to call it a day – If the day-to-day running of your business is impacting your health, relationships, or state of mind, then it’s probably time to let go and move on.
