What is the best time to sell a business? Timing the market has always been a challenge for business owners and there is no set formula for getting it right. While right now is a great time to sell a business, it may not be great for every business, or every industry. As the last couple of years have shown us, you never know when the next big crisis will pop up. Even if your business is successful now, there’s no guarantee that you will be able to sell it whenever you want. Here are a few common signs that you have waited too long, and how to avoid them.
Is Your Industry Struggling?
Sometimes progress and technology can cause many small businesses to fizzle out. Business owners who find themselves in this situation can usually see it coming, but some try to squeeze a little more out of it, or hope that things will turn around and end up waiting too long. Others think they can sell to someone who can breathe new life into the business and find a way to overcome some of the challenges within the industry. The truth is that buyers are looking for businesses in growing, or stable industries, and will avoid those in fading ones. If you begin to see signs that your industry may soon be obsolete, get ready to sell as soon as possible. If you waited too long, you may have better success listing your business as an asset sale, selling off valuable equipment and intellectual property.
Do You Have Poor Financials?
A healthy financial foundation is at the heart of every good business. Your numbers need to tell a good story about your business, so if they are bad, chances are the story is bad too. There are good business concepts that are poorly executed. There are also good businesses with bad bookkeeping and poor financial management. Either way, poor financials are a big red flag. Some causes for concern include declining sales, shrinking margins, disorganized bookkeeping and personal expenses getting run through the business. If you any of these financial issues are plaguing your business, address them immediately. Getting these things in order will remove concerns about the health of your business and add value to it.
Are You Burnt Out?
If you have had the feeling that your business is a burden, thought about retiring, changing careers or trying something different, it’s probably time to sell. Waiting until you are already burned out can end up costing your company, because you have lost your enthusiasm to run it. Understand that selling a business is not a quick process, and it can take anywhere from a few months to a few years to do it. During this time, you still have to run the business and do it well enough to maintain its appeal to buyers.
Plan on taking a few months to a year to prepare the business for sale, and up to another year to sell it. After preparing it for sale, you may get a second wind and reconsider. You would have lost nothing in the process and probably made your business healthier and more valuable in the preparation process. It’s important to have a little bit of foresight and take action when you’re feeling the need for change.
Are You Dealing With a Personal Crisis?
Life can surprise us with unexpected health issues, financial problems, family disputes and other sudden occurrences. Sometimes it’s hard to see a crisis coming, but if you wait until you’re right in the middle of one, a lot of your decisions will end up being emotional ones. It could also weaken your negotiating power, and cause you to settle, because you are trying to speed up the process. You can’t always anticipate a crisis, but if you do, start the sale process as soon as possible. It can prevent damage to your business and avoid a load of stress and frustration as you simultaneously try to deal with the crisis sell the business.
Are You Having Staffing Issues?
Losing important employees can affect your selling situation in a few ways. Depending on your industry, you may also be having trouble finding people to fill open positions. This could result in you working harder and longer hours to compensate for a smaller staff, which could lead to burnout. If the business is too reliant on certain employees, it could also weaken its value, its ability to operate, or its production. If you’ve lost managers, buyers could be deterred by the lack of proper management structure.
In this situation, the best thing you can do is fill the positions, thoroughly train new staff, and then sell. This will also reduce the likelihood that you have to stay with the company after the sale to operate the business or train others. Granted, with labor shortages still plaguing many small businesses, it may be easier said than done, but we have a few suggestions about how you can get around this.
Is the Economy Weak?
Since our recovery from the financial crisis of 2008, the US economy has seen record growth. However, with the pandemic, inflation and now the war in Ukraine, we have seen signs of it cracking. You don’t want to get stuck trying to sell in a bad economy. If you do, you’ll have to ride it out or settle for considerably less money. If you’re tempted to sell, do it while things are hot.
Are Business Loans Hard to Get?
Right now, business loans are fairly easy to get. The current, favorable lending environment makes it an ideal time to sell, but interest rates are slowly creeping up. When they are low, more people are looking to invest and more buyers qualify, bringing the demand for existing business up. If you try to sell a business in an economic turndown, or when interests rates are high and lending is restricted, you will have much less demand and may have to accept an offer that is much lower than you were hoping for.
The important thing to remember when it comes to finding the right time to sell a business is that what goes up, must come down. Ideally, you want to sell your business when the circumstances are good. Even though it may be tempting to continue to ride the wave of success, you never know when your window of opportunity will close. If selling a business is something that you have given serious consideration, there may be no better time than now.
If you own a Southwest Florida business, and you have contemplated selling, getting the help of an experienced business broker can be of critical importance. Corporate Investment Business Brokers (CIBB) has helped big and small companies from every industry maximize the profit from their sales. Even if you are not quite ready to sell, and just need to prepare for the future, we can help you create an exit strategy and succession plan that will carry you through the life of your business and beyond. Contact us to get started with a free business valuation and no-obligation consultation.
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