You’ve spent years building and growing your business. You’ve dedicated so much of your time and energy to ensuring its success, but it can be challenging to determine when the best time is to sell. Owners sell their businesses for a variety of reasons. When preparing a plan for selling your business, it’s a good idea to be straightforward and honest about what it would take to prepare your company for a potential transaction. You should also develop a strategy and timeline for hitting those benchmarks. But remember, this is a guideline and it’s not set in stone.
Reasons for selling
Certainly, events can result in the need to sell your business sooner or later than you intended. However, it is wise for any business owner to spend some time considering their situation and what events may necessitate the sale of their business. Having a plan in advance is a smart idea to prevent some headaches if you must sell sooner than you anticipated.
First, consider your financial security. For instance, will the sale of your business support your current lifestyle? You will need to consider any existing debts you have, and your cash flow needs for now and the future. Do you have other sources of income and potential long-term expenses that can be used for these debts and expenses? Investigating if the current economic environment is favorable to selling is also important.
Next, evaluate what your personal and family concerns may be around the sale of your business. Some people may need to consider selling due to a lifestyle change such as divorce or illness. You may be dealing with a conflict with your business partner that necessitates selling your business. Finally, many people are interested in selling their business simply to have more personal time or because they want to retire.
Finally, many entrepreneurs are constantly seeking their next challenge. If you have a new business interest, you may be contemplating selling your existing company. This happens when you have already achieved all your personal goals for that business. Or you may be interested in running a less intensive or hands-on business. Another reason may be that you feel someone else is needed to run the business to help it go to the next level.
Understanding timing
Businesses have life cycles, just like living creatures. One way to evaluate the best time to sell your business is by honestly evaluating where your business is in its life. There are five stages:
- The first stage is when your business new and just finding its feet. This is also known as the start-up stage.
- The second stage is when the business grows, and you build a name, clientele, and profitability.
- The middle phase occurs when the initial growth spurt slows, but you still have forward momentum.
- The fourth stage happens when your profits have leveled off, and you are able to sustain your gorwth and profitability.
- The fifth and final stage occurs when revenues are sliding, indicating that your business is in decline.
Visualize your business’s life cycle on a bell curve. You are likely to get the best price when your business is in the sustaining phase. Waiting until past the sustaining phase may be too late in terms of maximizing buyer interest and your profitability, and if you need to sell prior to this stage, a buyer may not see the potential value that you do. The key is to understand the impact of the stage of your business on the ultimate sales price.
What's next?
Transworld Business Advisors of Utah County has a team of brokers with expertise in selling businesses in a wide range of industries, and we have a proven process to help you sell your business to a qualified buyer regardless of the business stage. We know that selling your business can be a lot of work, but with the right help to manage the process, the sale experience can be much less stressful. Click HERE to schedule a FREE consultation today with Transworld Business Advisors to get started.
