For most small business owners, their ultimate goal is to sell their businesses. Some don’t yet realize this fact, but it’s true. The reason it’s true is that the alternative is not very pleasant: shutting down the business, abandoning loyal customers, firing employees, and liquidating inventories, furniture, fixtures, and equipment (often at pennies on the dollar).
There are usually three factors that prompt a business owner to consider a sale:
- Personal reasons, such as a wish to retire, health issues, or simply a desire to move on to a new adventure.
- Some crisis in the business.
- Someone shows up and asks: Will you sell your business to me?
Whatever the reason to consider selling your business, is there a best time to sell? In an ideal world, the best time to sell is when all of the following conditions occur:
- You have developed a plan to market the business and are prepared mentally and emotionally to carry it out.
- Business is going great. Revenue and profits have been growing steadily for several years and the trend continues. Dependable, well-trained employees are in place. You have well-thought-out business and marketing plans in place. The business can function without the owner’s constant attention.
- Financial Markets are accommodating. Banks and other lenders are lending to small business with reasonable terms and moderate interest rates.
- Industry trends for the business are positive: the industry and the industry’s customers are growing and profitable and/or the industry is consolidating.
- General economic conditions are good and in an uptrend. The stock market is up, economic sentiment is positive, customers, both businesses and consumers, have money to spend and they are spending it.
Not surprisingly, the ideal world does not exist and all of the conditions above are almost never simultaneously satisfied. If you are able, sell when many of the conditions above are in your favor. If you are not able to pick when you sell, your best strategy is to make the best of those elements you can control: yourself and your business.
- Select a team to assist you – attorney, accountant, business broker.
- Establish a target valuation
- Have a vision for your life after the sale
Prepare your business:
- Maintain a dependable, well-trained workforce – make yourself dispensable.
- Create an inviting atmosphere: clean up the premises, dispose of obsolete or unused equipment and inventories.
- Have a business plan and marketing plan.
- Maintain accurate financial statements free from items marginally related to the generation of revenue and profit.
The best time to sell you business is when you and your business are prepared and market conditions are favorable. You can’t control market conditions, but you can make sure you and your business are ready when conditions are right. Your business broker can be a helpful resource, even if you have no immediate plans to sell your business.