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How Do You Decide When To Sell Your Business?

by Dave Driscoll

For many small business owners, deciding when to sell the business may be the hardest decision of their careers. How do you know whether you just need a break or are truly ready to exit the business?

Four questions may help you clarify your situation.

Do you return from vacation refreshed and ready to jump back in…or filled with dread?

Take a real vacation, meaning don’t check in with your business multiple times per day, and don’t keep doing the same work as usual, just from a different location. Having strong employees to manage and solve problems is essential for the health of you and your company. Owner-dependent companies are far less valuable when selling the business. Do yourself and your business a favor and regularly take vacations to relax and regroup.

Returning from vacation is often bittersweet. However, if you are unable to muster some enthusiasm and fresh perspective after a genuine break, it’s time to begin preparing for the eventual sale of your business. Continuing to plod along without making solid progress toward your eventual exit will only leave you and your business drained.

Do you have the energy to operate and grow your business?

Owning a business is emotionally and physically exhausting. But entrepreneurs often derive a unique energy from this exhaustion that drives them forward. Do you still feel energized for the daily tasks, as well as strategic long-term planning and implementation? Owners who wait until they are burnt out jeopardize the survival of the business, in addition to reducing business value that should have provided the financial means for their own life beyond business.™ Remember, if a business isn’t growing, it’s dying. Maintaining the same level of business isn’t good enough because inevitably this results in a slow downward spiral as competitors step up and woo your customers with newer, better, faster offerings.

Is your business growing?

This may seem counter-intuitive, but the best time to sell your business is when it’s growing. Businesses with stagnant or declining financial results will not bring top-selling prices. Sellers often point to opportunities to regain and expand market share and would like the sale price to account for that potential. But buyers logically question why the current owner has not capitalized on those opportunities. Of course, buyers anticipate they can grow the business by bringing in fresh ideas and perspectives, but they are willing to pay more for businesses with less initial risk.

What can you do if your business is not growing? Identify the value drivers that can make the most significant improvement to your bottom line. Do you need to strengthen your management team and delegate daily tasks, allowing you to focus on growth initiatives? Is your business dependent on a small number of key clients? What improvements could significantly impact efficiency? Reach out to your business advisors for an objective perspective of ways to maximize your resources and improve your company’s profitability. Investing this effort a few years before you intend to sell your business will support a higher business valuation and sale price.

Are you ready to meet the changes and challenges in your industry?

The pandemic was the ultimate lesson in adapting and pivoting business practices in ways most owners never seriously considered. But far less drastic circumstances also require that businesses evolve regularly. New technology, changing societal norms, consumer preferences, and escalating expectations touch nearly every industry. Do you view the future of your industry with curiosity and excitement, or with apprehension and fear? A little anxiety around the unknown is normal, but if you notice that your outlook is shifting to foreboding, you should be organizing the documentation to tell your company’s story and consulting with a business broker to begin selling your business.

Explore your subconscious feelings and attitudes about your ownership path with these questions. Ideally, every owner should operate as if the business might be sold tomorrow. Regularly taking an honest look at your stamina and your situation may be hard. However, burying your head in the sand will only allow your business value to drop, while increasing your stress.

Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation and exit planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.

Submitted 36 days ago
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