In over two decades of working with business owners, one question we consistently hear is, “When should I sell my business?” Of course, the answer is unique to each business and each owner, but it is always a mix of financial, practical, and emotional factors. Gathered from our years of experience, here are four signs to look for if you are asking this question.
Sign #1: Financial Peak
By far, the most important factor in selling a business is its current financial state. The ideal time to sell a business is when it is doing well. Yes, this may feel counter-intuitive. If your business is thriving or trending up, it is natural to think that if you wait a little while, you can get even more for your business. Unfortunately, that line of thinking can lead to a great deal of regret — and we have seen it happen. Countless times, we have valued a business at a desirable price, but due to a subsequent influx in business, the owner decided to hold off on selling. A year or two later, the owner feels ready to sell, only to find out their business is worth less than it was before. Why? Often, these owners encountered an unforeseen circumstance like the loss of a key client or a shift in the market.
We understand the heartache and frustration that comes with this type of situation, especially after so many years of hard work. This is why our valuation process is extremely comprehensive. The way we value a business helps indicate the best time to sell a company. We look at financial trends over time, which not only helps determine a sales price, but also assures a potential buyer that your business is stable and will likely continue trending upward. Since we do not know what the future holds, we must focus on what we do know. Financials are the best evidence of where your business is going.
Sign #2: Burnout
Are you burned out? You are not alone. Burnout is the number one reason people sell their business. The burden of business ownership weighs heavily on owners, and most believe that the solution is to invest more into the business. This can be effective and may come in the form of working extra hours, or it may look like hiring an administrative staff force. The investment may be in your mental wellbeing or stress relief. A vacation, perhaps? (You may be surprised by how your employees rise to the occasion in your absence.) No matter the form it takes, owners must consider what solution is most sustainable for the business.
It is possible that you have taken steps to prevent burnout, and yet burnout has prevailed. If this is the case, it may be time to think about selling your business so you can spend more time doing what makes you motivated and fulfilled.
Sign #3: New Interest
Are you interested in doing something new? Is there another opportunity you wish you could pursue? Another reason that owners decide to sell a business is simply the desire to do something different. We meet many business owners who are not necessarily “burned out,” but who find they have lost interest in their business. They have been doing the same thing for so many years that they are not excited about it anymore. If you find yourself feeling bored with or detached from your business, an unfortunate side effect is that your efforts to sustain and grow the business have likely decreased along with your interest.
Continuing to manage a business you are no longer interested in is a certain precursor to burnout. Many business owners come to us during this stage with the desire to sell their current business and potentially buy a new business. Our business brokers and advisors have owned many of their own businesses, and speaking from experience, starting a fresh business venture can be incredibly revitalizing. As an experienced business owner, you can take your previous skill set and apply it to just about any endeavor you choose, with the added benefit of learning from your likes and dislikes from your previous business.
Sign #4: Retirement
Many people assume that “retirement” is the most obvious answer to the “when should I sell my business” question. While, in our experience, it is not the most common reason (it is actually closer to third, behind burnout and new interests), it is certainly a worthy reason. Many business owners have dedicated their life to ensuring the prosperity of their business. A business owner deserves to enjoy the fruit of his or her labor while still in good enough health to enjoy the time away from working.
Owning a business can be very rewarding, but selling a business and watching it continue to flourish can also be very satisfying. Perhaps it will be a family succession, or you want to give an employee the opportunity to buy the business, or you are dissolving a business partnership. Maybe you desire to stay on as a part-time consultant so you can enjoy new hobbies while assisting in the business on a more removed level. The choice is entirely up to you. No matter what you choose, however, it is essential that you work with an experienced partner to ensure a smooth transition, maintain business continuity, and preserve your business legacy and reputation.
Have you wondered, “When should I sell my business?” Have you recognized any of the four signs above? A good place to start is with our no-cost, confidential business valuation and consultation. Getting a professional business valuation will provide essential information so that you can make the best decision at the right time for you and your business. We are here to help whenever you are ready.