Don’t Try to Time the Sale of Your Business
Oftentimes, owners will ask me, “When is the perfect time to sell my business?” The best answer is: when your business is doing as well as ever and your profits have been trending up the past three to five years. Quite often owners refuse to part with their current strong profits and decide they will time an exit at a future date. However, timing your optimum sale can be extremely difficult.
The strength and eventual value of a small business can fluctuate from month to month; selling a business is not like selling a parcel of real estate. Real estate, for the most part, will maintain its value over several years. A business is at the mercy of many changing factors such as the economy, the labor force, available inventory and world health crises, as we’ve seen recently.
We are starting to see an uptick in Baby Boomers realizing the time to sell their business is now. Many Boomers have navigated their businesses through 9/11, the Great Recession and now COVID-19. They are not in the mood to take on any more stressful challenges.
Below are a few reasons why you should consider selling your business now:
Strong Market of Buyers
There remains a strong market of buyers. From strategic buyers looking for labor to financial buyers with plenty of investment money. With the great resignation, many former employees want to control their destiny and own their own business. It remains a seller’s market, yet with the tsunami of Boomers selling right around the corner, business owners may want to sell before it becomes a buyer’s market again.
Interest Rates are Rising
Right now, interest rates are extremely low. This may change in the next couple of years with rates rising. The time to sell your business is now, while rates are still attractive to buyers. The higher the interest rate, the less buyer activity.
Fresh Blood Needed
If you are a Baby Boomer, chances are most of your net worth is tied up in your business. As you’ve grown your business you’ve probably become more conservative. The thought of losing this large asset by investing in new growth ideas becomes less attractive. You may want to consider stepping aside and cash out to a buyer with fresh ideas for business growth. Your business will appreciate it and so will your employees!
It usually takes six months to a year to complete the sale of your business, from the time you start marketing until you are at the closing table. If your numbers look good with a strong three-year trend, you may want to start the process now. It may be difficult to walk away from your strong profits today, but remember: strong profits attract the best buyers.
It can be tempting to try to time the sale of your business so that the economy and your company are peeking, but in reality, it may be smarter to sell sooner rather than later.
This article was written by Sam Thompson. Sam is the president and owner of Transitions In Business, a Minnesota based M&A firm that specializes in selling business to business, healthcare, transportation, manufacturing, distribution and construction/trade services companies. Sam is a Merger and Acquisition Master Intermediary (M&AMI) and a Certified Business Intermediary who has successfully guided countless business owners through the sale or merger of their company. Prior to becoming an intermediary, Sam was a successful CEO and business owner for 29 years before selling his $16 million business.