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I have a couple of clients that want to sell their businesses. Each for a different reason - one wants to retire and the other is ready to move onto something else. Both have asked - "is now a good time to sell?" Not surprisingly, the answer is, "it depends".
Here are three factors to consider when timing the sale of your business. Of course, it is best when all three are optimally aligned. Or more simply, "get out while the going is good", but that is not always possible.
The State of the Owner
The owner is critical to the success and ultimate value of a business. Typically, once the owner is beyond his or her prime, the business value will begin to falter.
It is best to sell when the owner is engaged, still excited about the business and perhaps wiling to stay on after the sale. Likewise, the more youthful and healthy the owner the less they will appear eager to sell.
You want to be the owner that wants to sell, not one that has to sell.
The State of the Business
The value of a business is based on the economic benefits that a financial buyer can reasonably expect to receive from a business. All else being equal, higher growth companies command a higher price than their slower growing counterparts.
It is best to sell when a company is still on its growth trajectory and prospects are bright. Even better is when there is a proven track record and historic trends that support an optimistic outlook.
A prospective buyer wants to reap the benefits of the foundation you have laid - and they are willing to pay for it.
The State of the Market
Similar to selling a house, markets fluctuate. Optimally you want to be sell in a sellers' market, not a buyers'.
It is best to sell when the economy is thriving, money is plentiful and interest rates are low.
I don't know you or your business - yet. But the consensus is that now is a good time to sell from a market perspective. The economy is rebounding, interest rates are low and there is a lot of money sitting on the sidelines waiting for a good buy.
Looking at the graphs below, when do you think it would be best for this particular owner to sell his or her business? I'll treat the first correct response to lunch (assuming you are within reasonable proximity!).
Graphs
Top: Owner
Middle: Business
Bottom: Market
If you are thinking that you might want to transition your business and would like to discuss the optimal time for you and your business, please give me a call. I would be happy to help.
Until next month, Point Your Business Where it Needs to Go!
Best Wishes,
Kelly
©2014, Soundpoint Consulting, LLC
Sound Consulting. Solid Results
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