x

Determining When to Sell – Timing is Everything

selling business

A business owner can spend his entire career developing a business until it becomes his “baby.” Selling can be the most difficult and emotional decision a business owner will ever make. It is filled with emotions similar to sending a child off to college or giving a daughter away at her wedding, or watching your children move out of your house at the age of 18.

The timing and reasoning for selling must be right.

The reason for selling will also be a paramount issue for a prospective buyer. A buyer needs to be assured that the reason for selling is not due to negative factors such as problems in the industry, increased competition, or employee problems.

We have had many owners tell us they are waiting for the best time to sell. The problem is that no one can ever predict when that time will be unless they have a crystal ball and can predict the future. Fortunately, the best time to sell can be determined by a common set of factors, which we have listed below.

Burnout / Boredom—THIS IS BY FAR THE #1 REASON FOR SELLING A BUSINESS

If you have lost your GUMPTION or PASSION for the business, hate to go to the office, and cannot wait to leave, then you should GUT CHECK yourself and see if you should still be in the business, and if not start formulating an exit plan. Burnout and boredom are the most common reasons for an owner selling his business. Many businesses that have flattened sales for two or three consecutive years are symptomatic of an owner that could work harder to drive the business upward but has lost the passion to do so. If sales have flattened or started to decline, then it is a good bet that there has been some deterioration of employee morale, customer service, and/ or supplier relations.

If you experience burnout, one of the worst things that can be done is to hold on to the business and continue to produce years of declining sales. Declining sales will ultimately have a negative effect on sale price, when or if you do decide to sell. A savvy buyer will realize that an additional capital injection and significant effort will have to be utilized before this type of situation can be turned around. The main lesson in this scenario is that the best time to sell is when an owner is able to detect his burnout in the early stages.

Retirement (age)

At some point in life, the time comes to reap the benefits of years of hard work. This is another common reason for sale in the industry. From a buyer’s perspective, this is the most justifiable reason for sale, which creates a comfort level when analyzing a business. If the owner does not have a family member to pass the business to, he is faced with the prospect of selling. It is necessary to give a prospective buyer the right reason for selling.

Health

Health is a very unfortunate and yet common reason for selling, since it is usually out of the control of a business owner. Often, the sale has to be quick because of a decline in sales and a void of top decision making due to less time being spent at the business by the owner. On the other hand, a prospective buyer will feel more comfortable with this scenario. Structuring a deal for a quick sale due to the owner’s health does not have to be for a lower price..

You should be watchful of buyers that try to weasel in to get a bargain, because of a seller’s vulnerable position. If there is an right time to hire a capable business broker to assist in the sale process, this is it. Sure its wise to buy for the lowest price, but we are talking about a living breathing animal that is a business, made up of PEOPLE, and you want to make sure that the buyer has a good heart, good morals, and isn’t out to TAKE from you, for if he is willing to take from you, how would he treat your employees?

The most important thing to watch out for with the above reasons to sell is BURN OUT and BOREDOM.

As Chad Peterson says “WHERE THERE IS NO PASSION, THERE IS NO PROFIT”

If you are considering selling your business, contact Peterson Acquisitions today.