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Determining the right time to sell a business can be a tricky proposition. If you are thinking about selling your business, one of the best steps you can take is to contact an experienced business broker. A good business broker will have years, or even decades, of proven experience under his or her belt. He or she will be able to guide you through the process of determining what you need to do in order to get your business ready to sell and if internal and external forces indicate that the timing might be right to begin the process.
The primary reason you should contact a business broker long before you think you might want to sell is that you never know when the right time to sell may arise. Market forces may change, unexpected events like a large competitor entering your area, or a range of other factors could all lead you to the conclusion that now, and not later, is preferable. Other factors may indicate that waiting would be the better option.
In a recent The Tokenist article, “When is the Best Time to Sell a Business?”, author Tim Fries covers a variety of factors about timing an exit. At the top of Fries’ list is growth. If your company can demonstrate a consistent growth history, it will be more attractive to buyers. Or, as Fries phrases it, “What never varies, however, is the fact that growth is a key component buyers will look for.” Growth will be one of many justifications for the asking price when the business is placed on the market.
If your business is experiencing significant growth, then you have a very strong indicator that now could be the time to sell. Fries points to a quote from Cerius Executives’ CEO, Pamela Wasley, who states, “When your business has grown substantially, it might be time to consider selling it. Running a business is risky, and the bigger you get, the bigger the risks you have to face.” Often times business owners find themselves “over their skis” and realize that sustaining growth levels will be difficult, if not impossible.
Knowing the “lay of the land” is certainly a benefit as well. For example, have there been a variety of businesses similar to your own that have transacted recently? If the answer is “yes,” then that is another indication that there is substantial interest and activity in your type of business.
Reviewing similar businesses that have sold recently can help determine how much buyers are paying for comparable businesses. This can identify potential trends. In short, you should be aware of market factors. As Fries points out, everything from relatively low taxes and low-interest rates to strength in the overall economy and an upward trend of sales prices can reveal optimal times for a sale.
If it is determined that now is not the right time for you to sell, using the time to prepare your business for sale is a good use of time. Fries points out that smart sellers “look for a good time, not the perfect time” to sell a business. Working with a business broker is a great way to determine if now is the right time to sell your business and what steps you have to take in order to be prepared for when the time is right.
Experienced business brokers can be found on the International Business Brokers Association website at www.ibba.org. Those listed as CBI's have completed the stringent Certified Business Intermediary designation education and experience requirements.
