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When Is It Time to Sell? Part 2

These might be additional reasons the timing might be right.

Health

A sale is sometimes necessary due to the health of the owner.  Structuring a deal for a quick sale due to the owner’s health does not have to be for a lower price. A seller can set up a low down payment and an owner financing note for a longer period of time which will keep the sale price at the highest justifiable level, while getting the owner out quickly.

 

Market Factors

In addition to being ready to sell and having a solid profitable business, the economic marketplace must have its “stars” aligned in order for it to be a good time to sell.

A business doesn’t run in a vacuum.  External forces not only affect the growth of a business, but also its marketability. An ideal scenario to sell is when there is a strong economic environment of low interest rates, a growing stock market, a strong dollar, low inflation, low taxes, and a solid availability of capital. It is always a good idea to keep up with economic trends. While a bad economic setting does not help a sale, a good, profitable business will sell in good or bad economic conditions.

 

Shorter Stick Loses the Fight

If it were not for capital concerns, many business owners might never sell. There comes a point when the continued worry of funding accounts receivable, payroll or the rent will push a business owner over the edge. A business can actually become harder to handle financially with increased cash flow, even though there is more money generated by the business.

There is also the dilemma of growing a business to its maximum point and not being able to go beyond due to a lack of funding or managerial ability. You say to yourself, “If I just had some more capital I could do X, Y and Z and double the business.” We’ve represented many owners who have reached a comfort level in their operations and do not want or feel comfortable with investing more capital to get the business to the next level. This is similar to burnout.    A business will flatten out due to a lack of owner motivation. The salability will suffer and the sale price will be reduced if the owner stays put in this condition.

 

Continued,  When is it Time to Sell, Part III

 

 

From the book, Swinging Doors, A Guide to Selling Your Company, by Chad Peterson

 

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