The Best Time To Sell Your Business
We often get asked by business owners: When is the best time to sell my business? Naturally there is a lot to consider when you think about timing your sale – but the answer is quite simple. The best time to sell your business is: When you don’t have to.
Simply put, selling at your leisure is less stressful, more enjoyable, and often more profitable.
When business is going great, and you are enjoying owning your business is also a good time to consider selling it. To most business owners this is counter intuitive. When a business is thriving and owners are enjoying the rewards of the hard work that is paying off there is a desire to not only cash in on the annual profits that follow, but to relax a bit and enjoy the well-earned success!
To understand the best time to sell your business it’s good to understand what buyers are looking for. Three of the top criteria for buyers are: Growth, Cashflow, and Owner Independence.
Buyers are looking for companies with growth potential. If your business has plateaued or if you’re in the early stages of business and have not yet hit a growth cycle your business will likely be less attractive to buyers. Less attractive translates into lower offers. When a business is showing dependable growth for two or more years buyers pay attention and will pay more at the closing table if they are confident there will be increased profits in the future.
When a buyer is assessing the purchase of a business, cash flow is a key factor. A healthy business will generate enough cash to meet the following four financial needs of a buyer:
- cover operating expenses
- make the loan payments for purchasing the business
- compensate the new owner
- invest in growth
If your business has healthy cashflow that allows for the four financial needs above it will likely attract more buyers and sell for a higher price than other businesses that don’t.
Not all buyers want to purchase a job for themselves, and businesses that don’t rely on an owner for sales or customer relationships have more value to buyers. Having a well-run business that gets results through employees frees up a new owner to focus on growing the business beyond its current capabilities.
If you’re considering selling your business in the next one to five years, NOW IS THE TIME to find out how much your business is worth today. If you want to maximize the value of your business, start by discovering how your business scores in the 8 Drivers of Value, and what you can do to prepare your business to sell for maximum value. Click here to get your Value Builder Score and have a no-obligation conversation on what will increase the value of your business.