Learn when to sell a business for optimal profitability with Daltons Business
As highlighted in the first chapter, there are many reasons for selling a business, and hopefully, at this point you have some idea of your own specific motivations. However, the why walks hand-in-hand with the when, and whilst the distinction is subtle, it can also be crucial. So, if you are asking the question “when should I sell my business?”, then our guide is here to help.
Don’t forget to scroll down to the checklist at the bottom of the page for a quick overview of when to sell your business.
When to Sell 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. However, if you can remain responsive to market conditions, mindful of your own professional goals, and aware of any personal issues that may stand in the way of a profitable business sale, you stand to be in a much stronger position.
With this in mind knowing when to sell can be influenced by three major factors.
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.
Always check the market conditions to ensure 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 smartphones) 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.
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.
Professional growth, be it studying for new qualifications or searching for employment, offers you plenty of time to strengthen your position. In many cases, it pays to wait until your business is profitable and the market is right to sell. Ensure you keep an eye on how both perform as you prepare to sell your business.
There are occasions, however, when preparation is not an option. If a lucrative business opportunity comes your way then sometimes 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 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.
When to sell a business – Last Word
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 saleability entirely. Whatever you decide, read on and begin with the preparations for selling your business.
When Should I sell my Business?
1. 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.
2. Build your business – If your business is underperforming, then it’s often worth putting in the extra effort to increase profitably and subsequently saleability.
3. 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.
4. 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.
5. 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.