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When is the Right Time to Sell a Company?T hat is a question that only the business owner can answer. However, the "right" time is not always the obvious time, and it’s a good idea to look at all the signs.... the financial climate, buyer profiles and trends, owner problems and potential problems that might affect a timely sale. Instead of "burnout," wise sellers are more and more opting to "cash out." A general good answer to "When is the right time?" is "Sell when the business has reached its optimal peak." One of the surest ways to maximize the value of a business is not to wait too long to sell.
A survey of business activity nationwide shows that many sellers are taking advantage of the window of opportunity offered by today’s favorable marketplace. In this recent survey, almost one-third of business owners responded that they are considering the sale of their business. The first question one might ask, given the relatively healthy financial climate, is WHY sell when times are good? The answer, for many sellers, can be a resounding WHY NOT! Here are some of the reasons followed by tips for getting the process started.
The Buyers Are Out There: There are probably more strategic buyers out there than ever before as companies focus on their core businesses. Investment groups have more money than ever before and are paying premiums in many cases to get the best companies. Corporate executives, now out of work as a result of down sizing, are determined not to be down sized out of another position and are out looking for a company of their own. Many have substantial cash and are backed by others with money.
How can these buyers be found? Amvest is in contact with these buyers daily. Corporate buyers and investment groups contact us regularly to let us know their acquisition criteria. We also are in contact with these groups, and we maintain a detailed database of buyers' acquisition criteria. We are also contacted by executives looking to buy the company they work for, or when that is not possible, a company in the same field. Many times we match them up with investment groups who back the management team in a management buyout.
I t’s Better To Cash-Out Than To Burnout?: Burnout can come with a business that’s successful as well as one that’s failing to grow. The right time to sell is before the syndrome becomes a threat to the effective management of a business. What are the warning signs of burnout?
* That isolated feeling. The burnt-out owner has been “chief cook and bottle washer” for such an extended period of time that even routine acts of decision-making and action-taking seem like Sisyphean tasks. These owners have been shouldering the burdens too long.
* Fuzzy perspective. Burnt-out owners are so close to their work that they lose perspective. Prioritizing becomes a major daily challenge, and problem-solving sometimes goes no further than the application of business Band-Aids that cost money in the long run rather than increase profits.
* No more fun. Of course owning a business is hard work, but it should also include an element of enjoyment. The owner who drags himself or herself through every day with a sense of dread—or boredom—should consider moving on to a fresh challenge elsewhere.
* Just plain tired. Simply put, many business owners burn out from the demands placed on them to keep their companies operating day after day, year after year. The schedule is not for everyone. In fact, statistics show that it’s hardly for anyone long-term.
The important point here is for business owners to recognize the signs and take action before burnout begins to hinder the growth - or sheer survival - of the business. Many of today’s independent business owners feel they’ve worked hard, made their money and sense that now is a good time to “cash-out” and move on.
T he Best Price Comes from Selling While Up?: Other than burnout and its consequences, there are other factors that can lead to the “forced sale” of a business. Compelling personal problems (a divorce or death in the family, poor health), shortage of capital or outright failure of the business, the lack of heirs to take over - these are the traditional examples. Instead of waiting for unfavorable conditions, potential sellers should keep a wary eye out for that all-important right time for putting their business on the market. When might that time be?
Statistics will tell you that the right time to sell a business is when it is on its way up. By selling at this time, you can obtain a better price for the business because it still provides the buyer with upside potential. One of the surest ways to maximize the value of a business is not waiting too long to sell. *
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