THE MOST COMMON SIGNS
THAT IT'S TIME TO SELL THE BUSINESS AND MOVE ON
Is now the right time to sell your business?
While venturing out on your own and starting your business can be one of the most rewarding experiences of your life, it can also be one of the most stressful. The reality is that not all businesses last, and only a handful stand the test of time. Keeping this in mind, it’s always important to know when to move on and sell the business.
There’s no right or wrong reason to sell your business; when you’re ready, you’re ready. In my years as a business owner, and advisor, I’ve witnessed almost every reason for exiting.
Some owners are just tired and have had enough of the daily grind. Others might have a struggling business that has become a drain on their personal finances, while others may have been offered an opportunity of a lifetime to sell their business.
The reasons for exiting your business are as personal and varied as the business owners themselves.
This blog highlights the most common signs and reasons for selling your business. If you find yourself identifying with these, it may be time to think through a potential or near-future exit and start seeking professional advice and setting yourself up for the best outcome.
The most common reasons to sell your business
Knowing the right time to exit a business is oftentimes as important a decision as deciding to go into business in the first place.
A small business is often started with an idea, a limited amount of capital, and a load of enthusiasm from an idealistic and energetic entrepreneur. And, if they have built their business prudently and operated frugally, then there is a good chance that the business has increased in value. But, when the time comes to sell, many entrepreneurs and business owners miss their exit opportunity and end up paying a significant price for it.
So, here are the most common reasons to consider when deciding if now is the time to sell your business.
1. Your business is going well and making a profit
You may think it is counterintuitive to sell a business that is going well. But a strong business with good prospects is always easier to sell than an underperforming business.
A buyer is more likely to pay a premium for a business that is doing well. It provides a sense of security for their investment and allows them to envision a return on investment.
So, if your business is steadily climbing and net profit is improving year on year, it may be time to entertain the idea of exiting your business before the tide turns and your valuation has peaked.
2. Someone has offered to purchase your business
You may not be on the market or even thinking about selling your business but receive an offer from a potential buyer or competition.
Your business may be growing and fall into a particular niche that is trending up. This may capture the attention of other entrepreneurs and business investors.
Your business may be growing steadily and captures the interest of someone wanting to start out or expand and diversify their existing business portfolio.
If an offer is made that surpasses your current business value, it may be worth considering selling.
3. Your business has outgrown you, and your skillset
Business growth may be great, but it can also be very stressful. New growth requires new skillsets. Often as a business grows, it outgrows the owner’s skill sets.
Some people are great at running micro-businesses where they can control every detail. Others excel at running small businesses with a basic management structure, and some enjoy success running mid-sized businesses.
Every business, regardless of size or industry, has stages of growth. Each stage brings new challenges and requires different skills sets and experiences to successfully manage.
In instances like these, where your business growth begins to outstrip your current skill levels, it may be wise to consider selling before the business implodes. Alternatively, attracting an investor with the necessary experience and skillsets to help you transition your growth may be a smart option.
4. You’re burnt out and business ownership is no longer for you
Many business owners grow tired, become burned out and lack the drive and energy to continue.
They are no longer get excited about running the business they once loved and want a change.
The secret is to identify when you are reaching this point and then sell while you can.
Running a business with little enthusiasm and no energy usually results in the deterioration of the business performance. This devalues the business and could result in you selling it for a fraction of its true value when it was operational under normal circumstances.
5. Market and industry trends are changing or on the decline
If you have been running a successful business for a few years, congratulations. According to Bloomberg, 80 per cent of small businesses fail within the first 18 months of operation.
Circumstances, however, can change that are outside of your control. Consumer, market and industry trends may shift. Your industry may evolve unfavourably. New threats may emerge. Competition could intensify.
Selling a business for maximum profits is all about timing. It is easier and more profitable to sell your business in a growing industry or upward market trend than in a declining one.
6. You are heading into retirement
At some stage, we all retire. It’s inevitable.
Many business owners decide to retire, but their business is not primed for a maximum sell price. They, therefore, sell for a fraction of what their business is truly worth.
They get a valuation, believe that is what their business is worth, and sell.
The key is to optimise your business for sale. This process does not happen overnight and takes careful planning. The investment and effort are well worth it. It ensures you cash out for a significantly higher value and receive dividends for all your years of hard work and struggle.
7. Your life circumstances have changed
No one knows what is around the corner. Crystal balls and moonlight dances may work for some people, but for most of us, we can’t predict future life circumstances.
Family growth and demand, health issues, death, disability, and divorce are all personal life circumstances that can impact your business.
Ideally, you should already have an exit plan in place before one of these involuntary, unforeseen circumstances occurs. If not, it could result in you having to sell your business at well below fair market value—or even at a significant loss.
Your business should, therefore, always be “sell ready”.
Being sell ready takes preparation and planning, so it’s important to plan your exit strategy as early as possible, even if you don’t have plans to sell your business in the near future.
Whatever your reason to consider selling your business, recognising the signs can help ensure your business receives the handover it deserves. After all the years of hard work you put into building your business, there’s satisfaction in bowing out gracefully.
You deserve it, and so does your business.
Has the time come to sell the business but you want to ensure you don’t sell for a fraction of what your business is really worth?
We can help and it’s a lot easier than you think.
We have over 25 years real life experience in building and selling businesses.
Let’s begin by discovering what your business is worth with our quick and easy, no-obligation FREE Business Valuation Estimate.
There’s no obligation or complicated questions, and your information is completely confidential.
As always, I wish you all the best.