28 Sep How Do I Know When to Sell My Business?
Most business owners know that they want to sell someday in the future, but struggle with deciding when that day will be. There are of course a variety of factors to consider including the economy, the health of your business, and your personal needs. Let’s take a closer look.
When it comes to the timing, the last thing you likely want to do is jump into putting your business up for sale without having the proper preparation time. You’ll want to have all of your documentation up to date and neatly organized including contracts, agreements, licenses, tax returns and accounting records for the last five years. Assume that these elements will be carefully examined during the process.
You will also want to take time to ensure your business is in as good shape as possible visually if you have a physical establishment. If there is real estate involved in your sale, you’ll want to make a decision in advance as to what you plan to do with the sale or rental of this property. Often sellers decide to lease to their buyer, perhaps with an option for the buyer to purchase the real estate later.
Estimate the Selling Price
Another step to take in advance is to have an appraisal of your business performed in contemplation of a sale. You’ll want to know how an outside party views the value of your business to help you plan for your future. This may also assist you in the negotiation process. Learning the value of your business now will also help you make your decision as to whether or not it is the optimal time to sell. Prudent owners update their valuations periodically and know what are the key value drivers and other metrics for their type of business.
Think About Financial Considerations
Sellers often assume that they will be able to walk away from their business with a large payout. However, the reality is that quite frequently buyers will want to negotiate a payment plan to spread out the cash that they must invest over a longer time period and reduce the risk of buying a company. In this type of situation, you may not get the huge one-time settlement that you were hoping for to retire or to fund future endeavors.
Examine the Pros and Cons
It may sound old fashioned, but when determining whether or not it’s time to sell your business, some experts suggest simply making a list of pros and cons. For example, if the economy is doing well and people are actively buying businesses like yours, that’s a pro in favor of selling now. Of course, if your business isn’t currently faring as well, this would be a strike against selling at the present time.
If you feel as though you’re no longer enjoying your work and that you have the funds you need to retire, these are also good reasons to sell now. On the other hand, if you’re on a roll and feeling that you are excited about your daily schedule, then perhaps you want to wait. Go ahead and make a list, as it will help you clarify the points in favor and not in favor of selling right away. Austin Dale Group’s strategic exit planning services can help you sort through the options and get you where you want to go.