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Why and When to Sell Your Business

The decision by a business owner to sell his or her business is usually a difficult one.  It typically involves many different emotions and raises a number of questions.  What will I do after I sell?  Will I have enough money to be financially independent?  Am I selling because I’m bored or burned out, and if so, is it the right time to sell?

 

Sellers give me a number of reasons for burn-out:

I’m tired of managing people.

I’m worn out by recent company financial struggles.

I can’t keep up with the speed of technological changes.

The company doesn’t provide the challenge that it once did.

Bigger competitors are making business more difficult.

 

If you are suffering from burn-out or boredom it’s probably time to sell. The best time to sell your business is when it’s on the upswing. If you’re burned-out or bored the company will more than likely suffer financially due to lack of attention. You should sell before it begins to slide.

 

Some business owners don’t want to sell even though it may be a perfect time economically to do so.  They just can’t imagine life outside of business.  They perceive their personal identity is derived from their being the owner of XYZ Company.  They are afraid that they will lose status in clubs or business organizations if they no longer own their business. Of course, in reality, this isn’t true. They will probably have more time to be active in these groups and may achieve even more recognition. Besides the status issue, some owners worry about what they will do with their time.  They don’t have any hobbies, and their spouse doesn’t want them hanging around the house all day. This fear is also unfounded.  An entrepreneur who was creative enough to build the business in the first place will be smart enough to apply their new freedom and energy in creative and productive ways outside the business. I have seen some of my clients who had once wondered what they would do with their time after they sold their business, later wonder why they don’t have enough time in their day to finish all the important projects they have discovered to devote their time to.

 

There is no one right answer to the question of when the best time to sell your company is. One benchmark is to sell your business when you have had multiple years of good sales growth and profits. Don’t be afraid to leave the buyer some room for growth either. An astute buyer won’t give you your maximum purchase price if they think you are selling at the company’s peak. They are paying you for past performance, but also for the future of the business.

 

“The best advice I can give is to begin early in the life of your business planning your exit strategy.  You should form a team of advisors consisting of a CPA, an attorney, a financial planner, and business broker who will advise you long term on how to build your business and when it’s time to sell.”

 

– Wayne A. Simpson CPA, M&AMI is a Managing Partner at Utah Business Consultants and a Merger & Acquisition Master Intermediary with the M&A Source. Utah Business Consultants is a full-service Business Brokerage and Valuation firm.