When is the right time to sell a business?
Updated: Feb 1
Why do business owners decide to sell their business? What are the main driving forces when such decisions are made? When should you sell?
Some entrepreneurs have an exit strategy in place from start up, whilst others have owned family businesses for generations and it has become a part of their identity. Some business owners have lived off the business for many years and wish to secure their financial future and retire. Ill health often enforces a sale, as do changes in lifestyle and circumstances. Business owners decide they want a change, or decide to prioritise other parts of their lives which seem to have been affected by the time and effort involved in running a business. Others sell if they are not receiving the anticipated rewards, or feel that the insecurity of operating a business is not for them or they have simply not been able to make it suit their lifestyle.
In most cases it seems that personal circumstances dictate this important decision. However, business owners are often ill prepared for a sale and it will not necessarily lead to the wisest financial decision.
A business owner should always be looking to sell, because all companies are vulnerable to competitors, disloyalty of clients, and losing key personnel; a business can lose its value very quickly.
An astute entrepreneur will always have an exit strategy in mind and be open to acquisitions, expansion and the opportunity to sell for the right price. Even a growing business with excellent profits is worth marketing as it will have an excellent value, and owning a business is always risky. Sometimes, the larger a company gets and the longer it is kept, the chances of failure increase. Owners become more conservative, fearing greater damage than when it was a small business, becoming more risk adverse.
Any time there is an opportunity to get liquidity in your company, you should consider it, because goodwill is very transient and can disappear overnight. The chances of a business becoming and continuing to be successful are slim, and a business should be regarded as an asset. Although there is value in a business, there is no liquidity until you go through a sale and sell a part of, or all of the business.
You should always be looking to exit your investment; not because your business is in a good or bad place but because it is a smart business decision. Always having an exit strategy in mind will make you more prepared and flexible for those personal changes in your life, which will always happen.
Would you like to discuss the sale of your business?
Book your free consultation with the author of this post Zach Dogar.