When Should I Sell My Business?
When is the right time to sell your business? The answer seems simple: when you want to. Unfortunately, many life and business factors make the decision far less straightforward.
Some business owners have a clear plan to sell their business eventually, while others intend to hold onto it for the foreseeable future. Wherever you sit, you likely believe in the value and importance of maintaining your business – which is why it’s important to Know Your Next Move and evaluate it carefully.
Reflecting on our previous deals, the vast majority were sold at a fair price. Typically, buyers feel they paid slightly too much, while sellers feel they could have received slightly more. Overall, the value tends to align with the market, leaving both parties feeling ultimately satisfied with the transaction.
So, why the hesitation to sell if a fair deal is likely? Emotional attachment, personal circumstances, stress, and time commitments associated with the sale process all play a role. Helping business owners navigate this decision is part science, part art, depending on the seller’s philosophy and personality.
Each year, we guide owners towards or away from selling based on their mindset. Here are a few factors we suggest you consider when contemplating the sale of your business:
Desire To Sell
If thoughts of selling persist, it’s vital to acknowledge them. Desire is a driving force in all business transactions, and the choice to sell is no exception. Sometimes, even when the market is favorable and the business is ready, owners struggle to let go due to emotional attachment or the role the business plays in their lives.
If business success is your ultimate motivation or goal in life, selling can be challenging. It’s important to consider the sentimental value it holds for you and how selling may impact your sense of identity or purpose.
Personal Circumstances
Further to assessing your desire, you must delve into your unique set of circumstances and analyze the potential impacts of continuing to operate your business, versus selling.
Consider your possibilities based on the following factors:
Age
Are you nearing retirement age or seeking a lifestyle change? Selling your business may provide an opportunity to transition into a new phase of life or pursue different ventures.
Health
Consider your health status and its impact on your ability to effectively manage and run the business. If health issues are becoming a concern or if you prefer to prioritize your well-being, selling the business could alleviate stress and allow you to focus on your health.
Family
Take into account your family dynamics and their involvement in the business. Are there successors within the family who are ready and willing to take over? Alternatively, are you the sole proprietor with no family members interested in continuing the business? Evaluating the impact on your family’s future and considering their preferences can guide your decision-making process.
Succession plans
Determine whether you have established clear succession plans for the business. If you have identified capable individuals who can effectively lead the business in your absence, selling might not be the most appropriate choice. However, if succession planning is uncertain or non-existent, selling could ensure a smooth transition and provide an opportunity for someone else to take the helm.
Financial situation
Evaluate your financial circumstances and how the business contributes to your overall financial stability and goals. Assess whether selling the business would provide a significant financial return or if continuing to operate it offers ongoing financial benefits. Consider your future financial needs and objectives in light of these options.
Depending on your situation, some of these factors may weigh on your decision more heavily than others. Emotional attachment and financial reliance can trigger impulsive decisions, so it pays to consider these factors carefully.
Relationship To Your Business
Assessing your relationship with your business requires careful consideration of your level of involvement and personal satisfaction. Reflecting on your role in mission-critical tasks and overall business well-being is a good starting point. Would your business suffer if you stepped away from day-to-day operations? Does ownership bring you pride or a sense of dread?
It helps to gauge your satisfaction from different perspectives. Do you have a strong attachment to the future success of your business? Would it be difficult to hand over control to an unknown investor and let go of future plans and goals? These are crucial factors that can impact your desire to sell, and also, the chances of a successful sale. Ultimately, it comes down to comparing your satisfaction level with the stress you accumulate from running your business.
Value Trajectory
The potential value of your business is a compelling reason to consider selling, particularly during market fluctuations. The future outlook of a business can change rapidly, leaving owners uncertain about their business value next year or in the coming years. Assess the potential for growth or decline and factor this into your decision-making process, whether it’s the right time to sell or hold.
Uncertain about your business value in relation to current market conditions? Start a conversation with us!
Industry & Market Conditions
Further to our point above, zoom out from your specific business and examine the broader industry you operate in. Is your target market expanding, shrinking, or stagnant? Are market conditions causing volatility that could impact your business’s success? These external factors should be taken into account when making an informed decision about your business’s future.
Conclusion
The decision to sell a business is complex, much like the process itself. Each owner has unique considerations to address. However, a successful sale often begins with a well-founded decision to sell. By carefully evaluating all these factors and giving them due consideration, you can make a decision that aligns with your needs and goals.