Is there really a ‘best time’ to sell your business and will it affect your sale price?
For most business owners wanting to sell the goal is to achieve the best price possible for their hard work. One of the most crucial elements in determining a price is the business’s current and most recent performance. It is important to take a rational approach and use this information to not only establish a price for which the business will most likely sell, but also and perhaps more importantly, decide whether or not now is a good time to sell. Choosing when to sell is not a science, and can be even less so in an uncertain economic climate, but there are certain truths that simply don’t change.
It is not uncommon for business owners in an ailing industry or with declining performance to wait until this point to sell their business. The problems with selling your business whilst it is on a decline may be obvious from the outside, but for many hard working business owners, the problems are often quite hard to accept or even see. Quite simply, to attract a buyer you either meet the market on price (which will likely be much less than you expect) or, if possible continue running the business until the performance and profitability is picking up or levelling out. This course of action may equate to a few more years in the business than you anticipated.
As one might expect businesses with an increase in performance and in a growth industry are the most likely to sell. They tend to sell quicker, gain more enquiries and sell for higher prices. The irony of this is that in situations when a business is most ripe for selling, the owner is the least likely to sell. This isn’t necessarily a bad thing of course; if everybody sold their business as soon as it exhibited signs of growth, nobody would make any money. The point is; if you are thinking of selling; don’t wait until your business is in decline, a state that is the least appealing to buyers, before you decide to ‘cash in’. Buyers are prepared to pay a lot more for increasing profits.
History proves that the timing and the profitability of your business is crucial to the end result and the time frame required in achieving this. So, if you want the highest price possible don’t be afraid to make a move whilst your profits are improving. It could make the difference between negotiating with one buyer who wants to pay you less, or choosing between handfuls of buyers fighting to pay you more.