How to Find the Right Time to Sell Your Business
How to Find the Right Time to Sell Your Business
Deciding to sell your business can be a tough call. The act of selling it is no walk in the park, either, but for a lot of entrepreneurs out there, it’s the right choice to make. Below we have a few of the most common factors that influence an owner’s decision to sell. If you’re unsure whether you should sell or not, comparing your own motivations with those of your peers is invaluable to the decision-making process.
Burn Out and Fatigue
You likely had a surplus of energy and excitement and drive when you were first starting out as a business owner. It was something new – something that you were hungry for. Unfortunately, enthusiasm tends to fall over time. Maybe you’ve grown bored, maybe the stress has burnt you out, or maybe the business that was meant to set you free financially has become an emotional anchor tied around your neck.
This isn’t a sign of weakness – in fact, burn out and fatigue are second only to retirement as motivations for selling a business. Entrepreneurs are hard workers by nature, but that hard work brings a proportionate amount of stress. Sometimes selling is the best option, not just for your health, but for that of your business. After all, if you’re not at the top of your game, then you won’t be running the company to the best of your ability.
Getting Too Old for This
Now let’s touch on the most popular reason of all to sell your business – retirement! While plenty of entrepreneurs plan on working until they drop, there are at least just as many of us who looking forward to living out our twilight years surrounded by family enjoying the fruits of our labor. Sometimes age can slow you down, be it mentally or physically, to the point where you are incapable of running the business any longer. If and when that day comes, there’s no shame in stepping back from your life’s work and basking in the kind of satisfaction that only comes from decades of hard work.
Chronic and Terminal Illness
While stress and age contribute to the risk of illness in no small way, the fact of the matter is that disease and disaster can strike even the healthiest and most well-prepared of us without warning. Terminal illness, for example, tends to cause some radical shifts in priority and perspective that could lead to an owner to sell their business to cover rising medical costs, to remove the added stress that comes with said ownership, or to retire earlier than expected. Chronically ill family members, too, can inspire an owner to sell for similar reasons, with the added advantage of having more time to take care of those who need it most.
Divorce and Other Affairs
It will be unsurprising to many of our readers to learn that divorce is one of the most commonly given reasons for selling a business. Much like chronic illness, divorce is an exceptionally stressful process for all involved. An owner might need to sell to pay for attorney and court fees, or to help fund a new start in life. If a business is owned by a married couple, then the sale might not be optional. Some settlements require the sale of a business as a part of their conditions.
Unforeseen and Preventable Disasters
In business, chaos reigns. Potential disaster lurks behind every corner and even minor issues can build on each other to create real catastrophe. Market trends can seem unpredictable at times, to say nothing for the economy as a whole. Perhaps the biggest threat to a business isn’t any specific event, but an attitude of complacency. This can lead to an internal culture that lacks attention to detail, which in turn leads to a build-up of overlooked mistakes and small, but growing problems. Other red flags for shaky business footing include:
- when your business’s income largely depends upon only a few major clients;
- declining activity in your chosen industry; and
- if you, as the owner, have over-leveraged your own assets for the sake of the business, thus risking bankruptcy.
Be vigilant. Not only can disaster cause you to sell your business earlier than you would have liked, but it often means a lower sale price, too. For more on appraising the value of your business before selling, follow the link to our blog here.
A booming economy can be both a blessing and a curse to a business owner – a blessing for the increased profit it brings in and a curse for the new wave of entrepreneurs encouraged by healthy, stable market conditions. In this scenario, older businesses won’t always have the advantage. New competition can bring with it new ideas that have the potential to revolutionize entire industries. If your business is having a hard time keeping pace with evolving trends, then it might be a smart move to sell while your business before you fall too far behind.
Your Personal Timeline
Many entrepreneurs start their businesses in the hopes of flipping them further down the line for a bigger payout. Some might go so far as to include a target exit date in their business plans as a goal to aim for. Business plans, more often than not, have to be adjusted as a company grows and conditions change. Nevertheless, business owners have a tendency to persevere when faced with new challenges. Even if they can’t meet their initial target date, many end up selling as a part of their own personal timelines rather than external factors beyond their control.
Just like disaster, opportunity can strike unexpectedly. If your business is in a growing industry and has a strong upward trajectory then it’s not impossible that it could receive unsolicited offers from interested buyers. When this happens, it’s easy to see dollar signs. However, would-be sellers should exercise caution before jumping blindly at the first offer that crosses their path. No matter how enthusiastic the interested party is, they’re still business people at the end of the day just like you. As such, their offers tend to fall on the smaller side. An objective appraiser or sell-side consultant can be invaluable in these situations.
A Little Advice
Don’t be afraid to ask for advice or help when selling your business. It’s a major event that can come with stress and, yes, some amount of anxiety. Consult with other entrepreneurs and business owners while paying close to attention to those with experience in buying and selling businesses. Their motivations can inform your own and their first-hand experience is a resource greater than any book or online article.
Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website or calling 727-279-5037.