Sometimes there comes a time when it is a good time to sell your business. Either by choice or because your business model is no longer profitable, you are forced to sell your business, transfer ownership to someone else or (in the worst-case scenario) simply close it down.
As a business owner or manager, it can be difficult to determine the right time to exit your business. In this article, we will look at when is the right time to sell your business and how to figure it out.
How to know if you should sеll your business?
1. You do not like your business
As your company grows, the start-up difficulties (e.g. finding financing or marketing promotion) start to disappear. Although these problems seem difficult, they are the most interesting for many entrepreneurs. But eventually, they will be replaced by easier, but rather more mundane worries about management and staff. Many business owners then have to adapt to new responsibilities, which are always welcome. If these new problems do not arouse any interest in you and strongly affect your desire to work, then it is time to sell your company with WebSiteClosers Company.
2. The company has outgrown your skill set
It may happen that you, as a leader of your own company, realize that you are less and less involved in its development. This can be a hard truth to accept, but what makes a good entrepreneur above all is the ability, to be honest with yourself. For example, you may be a great salesperson. Thanks to this, your company eventually reached a high level of income but taking into account the change of the business model, additional skills in different areas are required from you as a leader.
3. The market is moving against you
If you recognize that there is a new trend on the horizon that threatens to make your business marginal or completely unnecessary, it is time to think about an exit plan.
When is the best time to sell my business?
The perfect time for getting the most value is the period when your sales and profits are high and on an upward trend. A stable profit trend will allow the buyer to pay a higher price and still meet the return on investment criteria. The presence of good performance also provides the buyer with confidence in projected future earnings.
Price is dynamic and the right timing has a significant impact on the prices paid to acquire a business. External factors such as the economy, industry trends, competition, stock market volatility, investor confidence, interest rates, and geopolitical considerations are cycles of constant change that affect value.
Internal conditions within a company also change. Often in combination with external factors, sometimes independently of these factors. Change is happening and will happen, and it always tends to affect the value of a business – sometimes reducing the value and sometimes increasing it.
A good visualization of the right time would be to imagine the life cycle of your business as a bell-shaped curve, with the peak being the top of the growth cycle. The top is when you have reached a flat growth plane… maintenance mode. Buyers pay the best prices when they don’t see the top when the curve is still climbing upward.
Once the top is visibly broken, buyers may miss the opportunity or may pay prices based on a downward trend and a higher risk factor. If you wait until your revenues are already sliding toward the bottom of the bell curve, you have waited too long. Your business has already started to decline before you did. To get the best deal, you must sell on the growth path.
When to sell a business: conclusion
There is no universal recipe for how do you know when to sell your business. But the very possibility of such a sale is always related to the value that you imagine for the market. Financial results are a consequence, so they can stay normal for a while. But if you stop giving value to the market, you will either have to change or get ready to leave.
