When Is A Good Time to Sell Your Business?

Is this A Good Time to Sell Your Business?

The mantra of ‘buy low and sell high’ should be taken to heart by every business owner when it comes to selling their business. The best time to sell a business is when one does not have to sell, but rather because selling a business is the best option at the present time. The most common reason for selling a business is the pending retirement of the owner. Many business owners wish to sell their business simply in order to ‘cash out’ and use the proceeds from the sale of their business to take life easier. Other reasons include personal issues (such as divorce), health reasons, or a forced move.

Understand Reasons for Sale

  • Understanding the reason for why one wants to sell their business will help the seller prepare their business for sale.
  • It takes time to sell a business (often up to twelve months), so a seller should be prepared to continue running their business during the lengthy sales process.
  • If the reason for sale is retirement or simply a need to improve one’s lifestyle, then the seller will typically have plenty of time to sell.
  • On the other hand, a ‘forced sale’ due to an unforeseen or unexpected personal or health issue may force the seller to take a reduced purchase price.
  • This is because the seller will simply not have enough time to wait for the right buyer – at the right price – to appear.
  • Further, a ‘forced sale’ makes a smooth transition to the buyer after the sale very difficult.
  • The buyer will want a smooth transition in order to keep all of the customers, employees, and suppliers on board after the sale.
  • A seller that is not able to effectuate a smooth transition after the sale typically will thus lead to a reduction in the purchase price.

Forced Sales are Not the Best Time to Sell Your Business

A ‘forced sale’ often results in the seller not receiving the same price as they would typically receive under normal circumstances. Typically the business is underperforming because of these external pressures on the owner. Also the seller will not have the luxury of time..they need to sell now! This of course will result in the buyer having more leverage during negotiations, which will result in a lower purchase price. One way to prevent this from happening is for the seller to prepare their business to run in their absence in case of personal or health issues.

Favorable Business and Personal Environment Best Times to Sell

  • It is always best to sell during a time of ‘normalcy’ for the business and for the business owner.
  • Sell when the economy is strong.
  • Sell when one’s personal life is as stable as possible.
  • Sell when one thinks the business is doing great.
  • This will give you as the seller far more leverage when dealing with various buyers because they do not HAVE to sell..they only WANT to sell.

Timing of the SaleĀ 

When thinking about retirement, it is always best to give yourself at least a year to sell the business. This will enable you to have the luxury of time to sell rather than having ‘one foot out the door.’ A business should be run without disruption during the sales process. In fact, business valuations are significantly affected by how the business is actually doing at the time of the sale, compared to when the business was initially listed on the market.

Focus on Running Business During the Sales Process

A business owner should always be focused on running their business. Do not get distracted or make unsound business decisions while the business is on the market. This will only ultimately result in a lower purchase price. Let a professional business broker guide you through the process.

Call Martin today to get a FREE business evaluation!