A business owner can spend his entire career developing a business. It’s his “baby.” Selling can be the most difficult decision a business owner will make. It is filled with emotions similar to sending a child off to college or giving a daughter away at her wedding. 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.
Many owners tell us they are waiting for the best time to sell. The problem is, no one can predict when that will be–unless they have a crystal ball and can predict the future.
Fortunately, the best time to sell can be determined by the common set of factors.
If you have lost your passion for the business, hate going to the office and cannot wait to leave, then it is time. Burnout and boredom are the most common reasons an owner sells his business. If cash flow has bottomed out for a few years it may be a sign of an owner who could work harder to drive the business forward but has lost the desire to do so. If cash flows have cratered or started to decline, it’s time to suck it up and sell before it’s too late.
If you experience burnout, one of the worst things you can do is hold on and let cash flow gradually decline, year by year. When or if you do decide to sell, declining cash flow will have a negative effect on sale price. A good buyer will see that an additional capital injection and significant effort will have to be executed before this situation can be fixed. The main lesson in this scenario is that the best time to sell is when an owner is able to detect his shelf life and get out when he can.
Want to work until you are 80? Do you want to wait until 65? What if 65 or 80 don’t come around for you? If you could retire at 40 would you? Too often we talk to people who have a dead set age in their mind of when they want to retire. There is no time like the present to go live instead of work, no matter what walk of life you trek.
From the book, Swinging Doors, A Guide to Selling Your Business, by Chad Peterson