When is the best time to sell your business?
Many clients will ask us this question. It’s such a simple yet complicated question. Knowing when to sell your business is straightforward. You may be able to imagine your business exit in 5, 10, or 20 years. The complicated part is knowing how to decide when the right time is upon you.
To better understand this decision, it may be helpful to contemplate the question in reverse.
When is the worst time to sell a business?
Clients sometimes ask us this question, too. Our feeling is that the worst time to sell your business is when that decision is made in haste or in reaction to some single event. We sometimes sell companies where the owner just woke up one day and said, “sell it now!”. The problem with this method is that owner and their business is at the mercy of the short-term realities of the market. It’s extraordinarily difficult to time the market and something no one should try to do.
To avoid this situation, business exit planning is paramount.
The best time to sell is when you have achieved the goals you set out for yourself and the business.
Most entrepreneurs do not develop a business exit strategy. Therefore, these goals do not exist or they’re not on paper. Business owners are mindful of cash in the bank, budgets, revenues, and other planning points. But, when it comes to business exit planning, we often see a big blank slate. Business owners know it is a good idea to plan, but the day-to-day operations often get in the way. It can be hard to know where to start.
Arming yourself with a comprehensive business exit strategy is the answer to the question, “when is the best time to sell a business?”. Evaluating and aligning the following points can help get you started:
- The current and future worth of your business
- A personal wealth plan
- Understanding the mechanics of a business exit strategy
Bringing these elements together will form the basis of your strategic exit plan, complete with goals and trigger points.
That is how you know when to sell your business.
A business transition plan has benefits beyond knowing when to sell a business.
Separating the emotionally charged decision from the business decision.
Selling a business is a huge decision and you want to get it right. By doing advance planning you remove a huge source of anxiety, which is “should and when should I sell?”
Getting your ducks in a row
A good exit plan will also articulate all the collateral documents you should have on hand (the “diligence items”). We often assist clients with accumulating these data far in advance of the time we actually need them. This provides a huge advantage when it is time to sell by reducing the intensity of accumulating and organizing information…it’s already done!
Knowing where you are going and how and when you’ll get there is a fantastic feeling of certainty.
Putting it all into perspective
Like many things in life, making progress on important matters sometimes takes on a life of its own. We tend to put off what we don’t know how to do. Our perspective and advice is for business owners to embrace curiosity and take small steps. Yes, an exit strategy is not a simple thing.
A business exit plan has many parts. Take those parts one at a time and make some progress…you’ll find it rewarding that you are doing something to solve an important issue in your personal and professional life.
ExitView is Ashland Capital Advisors business exit planning division. We work with entrepreneurs in many different businesses and assist anywhere from 3 months to ten years!