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There truly is no perfect time to sell your business. Knowing when to make a move is one of many characteristics defining a successful entrepreneur. In my opinion, the most important item in order to be successful in business is passion. If the business owner’s ‘flame doesn’t burn inside’ anymore, and passion is gone, it is time to sell – money and other factors aside. If passion is driving you to work harder through the exhaustion, you may not be ready to give it up. Either way, there are key items to notate when making this decision.
FACTORS YOU CANNOT CONTROL:
What Are The Market Conditions – While this will not always be relevant based on your particular business or industry, it is important to understand the economy and outside factors that could help drive your businesses’ value up or down. The Novel COVID19 Pandemic has affected travel. Are you in the travel industry? If you are, what type of effect does this pandemic have on your business? Have sales go up? Have reservations go down?
What is going on your industry – Keeping up with changes and trends in your specific industry will also dictate the right time to sell, especially with technology.
FACTORS YOU CAN CONTROL:
WHAT DO YOUR FINANCIALS LOOK LIKE? Are you able to produce 2 to 3 years of tax returns that are accurate and show maximum profitability? Solid books and tax returns help deals qualify for Visa opportunities and allow for loan and SBA pre-approval, opening a wider potential buyer-pool.
YOUR ROLE IN THE TRANSITION PROCESS. A standard requirement in most contracts includes a 14 day transition period in which the seller will train the buyer (free of cost) to help him/her get acquainted with their new business. There are often situations where the seller stays with the business for an extended period of time and is a core component in the purchase contract. Transparency and commitment from the seller is often exerted by the seller staying involved for an extended period of time. Are you willing to do that?
DO YOU HAVE A TEAM OF PROFESSIONALS READY TO ASSIST YOU IN THIS TEDIOUS PROCESS? The sale of a business does not happen on a handshake. Make sure that you have attorneys, accountants, consultants, appraisers, and your business broker on notice.They will be instrumental in negotiating, mediating, valuating, and helping bring your deal to the closing table. They will prepare you for the calls they will get from buyers, bankers, and others that could potentially be involved with the deal.
QUESTIONS YOU MUST ASK YOURSELF:
WHAT OTHER OPTIONS DO YOU HAVE BESIDES SELLING? The answers to this question will vary by situation. If you do not sell your company, will you keep it? Shut it down? Perhaps try to bring on a new investor? There are often cases in which a buyer ends up turning into a strategic partner. Evaluate all of your options, and be prepared for some curveballs. Ask yourself if you will really be improving your financial or personal situation by selling?
PASSION IN THE BUSINESS OR EXHAUSTION FROM THE BUSINESS? If you are absolutely exhausted from your efforts and it is taking a toll on your health or personal life, it probably is time to Sell. If passion is driving you to work harder through the exhaustion, you may not be ready to give it up.
ARE YOU PREPARED FOR SOME OF THE NEGATIVE EFFECTS OF SELLING YOUR BUSINESS? Perhaps one of the hardest things for a business owner to do is tell your employees (who you have been shielding the deal from) that they have a new boss and you are no longer their captain. There can be other public repercussions that you will have to face, such as investors, friends and families’ opinions. The personal bonds with your employees will perhaps be the most emotional effect of the sale of your business knowing their financial livelihood is no longer in your control, and that those relationships may no longer exist.
If you are selling knowing you will eventually (or even immediately) get back in the same industry/type of business, understand there are legal factors that could hurt you. Make sure to not sign an overly restrictive non-compete. Make sure your emotional attachment to a business that you put your blood, sweat, and tears into- is not going to give you second thoughts. Selling is about letting go and moving on.
ARE THERE STEPS YOU CAN TAKE TO MAKE YOUR BUSINESS MORE ATTRACTIVE TO POTENTIAL BUYERS? Can you increase the value of your business by making some changes prior to listing and selling your business? Consider what factors make it attractive, or not attractive. What are your profits? What are you current sales trends? What is the location of your business? What is the condition of your equipment?
A major issue that always comes up when an individual wants to sell their business, is they believe that the business can function just fine without them. However, the business might be far too dependent on the business owner, or perhaps too dependent on strategic relationships that are rooted to the owner. Evaluate your situation and start to make the shift to which the business can work better without you around to prepare in preparation for the sale of your business.
WHAT IS YOUR PLAN AFTER YOU SELL?
What will you do the day that your business is sold? If your trip is already booked to travel the world, you probably have the right idea. Is there another venture that has your interest or is there another opportunity knocking at your door? Is there another passion you want to chase? Be committed to whatever decision you make and have a plan post sale. Selling is about letting go and moving on.