When is the Best Time to Sell a Business?
When is the Best Time to Sell a Business: 4 Different Factors
The most honest and best way to answer this question is: there is no best time to sell a business. Often times, it depends on whether the seller is truly ready to sell his/her business, two, if the business is making a profit, and three, the real reason why you want to sell your business.
Before you decide to sell, let’s explore four factors that will determine the best time to sell a business.
Factor 1: Is your Business Ready for Sale?
The first thing you need to evaluate is whether or not your business is ready to sell.
What we mean by that is, how is your business performing financially? Are you making money or are you not? Are you losing money or breaking even?
Obviously, if your organization is making money, you may not want to sell your business, and why would you right?
On the other hand, if your establishment is under-performing, then you need to be honest with your brokers and the people who may be interested in buying your business. Most interested parties will want to know why your business is failing.
Frequently, small business owners will turn to business brokers or investment bankers for valuation. Having an unbiased, third-party business valuation will also make your asking price much easier to defend during negotiations with potential buyers.
Factor 2: Can the Current Market Affect the Sale of your Business?
The answer is yes. Certain market factors will affect business transactions. Sometimes, these factors will benefit you as a seller, and sometimes it won’t. In general, take a look at two key questions to get a better idea of how market trends can impact your sale:
Question 1: Were there any businesses in your industry (similar to yours in both sizes and operations) that were sold?
Question 2: Were there any smaller businesses acquired by larger companies? If so, the businesses must be in amazing shape to pique the interests of big organizations.
When you review the number of businesses that are comparable to you, you will get an idea of what you could get for your business, this can be very valuable as it shows how much prospective buyers paid. However, this will only give you a general idea.
Factor 3: Market Situation and Trends
Similarly, there are a number of market factors that can provide a solid indication of the best time to selling your company:
- there’s a high volume of comparable businesses in your industry that are sold
- an upward trend in sales prices
- an upward trend of strategic acquisitions
- low tax & interest rates
- an economy that shows signs of growth and strength
- affordable debt financing
According to Fit Small Business, a thriving industry is a clear indication of a good time to sell. Although it may feel counterintuitive to sell a small business when the market is doing well, that is exactly the right time to do so. Think of it this way, if you are looking into a type of business to buy, you wouldn’t want to buy it when their market is under-performing would you?
If the economy isn’t doing very well, does that mean you shouldn’t be selling your business? Important advice for that is, don’t be discouraged from a poor economy. This applies especially to businesses looking for strategic acquisitions. Most companies who want to expand their long term businesses would acquire companies that are doing well during economic turmoil.
Factor 4: Are you prepared to sell your business?
Consider the two main reasons below:
Reason #1 Finances
Do you have enough money put aside after your business is sold? Granted, you will receive a lump sum of money but would that be enough for your future plans? Not everyone will want to retire, some people might even want to start another business, so ensuring you have enough capital is important.
When you decide to embark on a different business venture, money is definitely going help. If you don’t think you’ll have enough money put aside for that, then maybe it’s not the best time to sell your business.
Reason #2 Personal Attachment & Motivations
The second reason is more personal than the first, the business you built and started is your baby, you became very attached to it and so that is a good reason not to sell. Perhaps you started running this business from the ground-up and likely invested a significant portion of your life into its success.
On the flip side, you might be unmotivated and burnt out from operating your business, which is an honest internal reflection of how you truly feel about the business. All in all, understanding yourself and your motivation can ultimately save you from making a mistake you don’t want to make – selling a business you have built from scratch.
If you’re feeling burnt-out and just want to get rid of the business because you’re feeling anxious, that might not be the best solution to your problem. Think it through before you make any irrational decision.
To conclude, our best answer to the question: When is the best time to sell a business really depends on you as a business owner, how you feel with selling as an exit strategy, the market situation, your personal motivation, and business performance.
About the Business Exchange
Established in 1998, The Business Exchange has over 20 years of experience specializing in lead generation in the franchise and business opportunity industry, in print and online. We are a full-service advertising agency that connects business sellers to prospective buyers. Call us today at 1-877-337-1188 to learn more about our Business for Sale listings and Request a Quote!