14 Jan THE RIGHT TIME TO SELL YOUR BUSINESS MAY BE NOW
When is the right time to sell your business?
In the December 26, 2015 edition of ENTREPRENEUR MAGAZINE, an article focused on what they termed as “ the hardest decision you’ll ever make as an entrepreneur”.
Surprisingly, it was not about when or how to start your business. It was not centered around growing your business.
Instead, the article pointed out the importance of understanding what a business owner might risk if they waited too long to cash out.
It can be a difficult paradigm to understand. When business is good, getting out may be the last thing on a business owner’s mind. But one must remember: Your business is like a stock. And thus, you want to ‘sell high’ to maximize the value of your business.
Planning for that day can be difficult. One never knows when the next recession is coming; when an illness may strike or a family situation will take precedence over running a business.
But should any number of factors collide that result in a downturn in your business, the results could be crippling in terms of business value and the ultimate sales price.
From the article: “Businesses that have gone flat or, worse, are trending downward will have a tiny universe of buyers. As a result, their ability to negotiate the value and terms will be compromised,” warns Abe Garver, managing director of Palm Beach, Fla.-based M&A advisory firm BG Strategic Advisors.
Buyers want to feel they’re making a good investment and want to see evidence of solid past performance. And they will pay a premium for that performance. Put bluntly: owners that sell when business is good can typically maximize value. Owners that sell when performance is lagging can’t. Ask any business owner who contemplated selling their business before 2008 and then tried to sell either during or immediately after the recession years of 2008-2011. Most, if not all, regret delaying the decision.
Of course, hindsight is 20/20, but if you own a well performing business, you owe it to yourself to at a minimum evaluate the current business-for-sale market to see if now may be the opportune time to sell your business.