There are many different reasons for selling your business. Whether it be retirement or just time for a new challenge, the right time to sell is more determined by your preparation than it is by external market peaks and troughs.
If you are the owner of a small business, it is never too early to begin planning for your exit. The more time you plan the change of ownership, the more valuable your business will be to potential buyers.
And who knows, putting the time and energy into preparing your business for sale may increase the value and profitability so much that you decide that you don’t want to sell after all. And there you will be with a business that has grown.
When is the right time?
There are so many factors that go into selling a business that there will probably never be a perfect time to sell. This will be particularly true if you have built the business up over the years. You will feel a connection to it and the people that work for you and deciding to let go of all that can be a very difficult process.
Sometimes the decision is made for you. You might not be breaking even, or you are ill and can’t handle the business anymore. You may be moving due to external circumstances and you need to sell up before you go. These situations will at least give you an idea of the kind of timeline you are working with.
Retirement or moving onto the next challenge will mean figuring out the timeline on your own. However, preparing your business for the sale and sticking to your plan should create the ideal opportunity to dictate your ideal time. The more you prepare, the better the timing will be.
What is an exit strategy?
If you have been running your business for a number of years, you should have an exit strategy in mind. No matter how much you love what you do, eventually the day will come when you can no longer run it. When this time arrives, do you know what you will do with the business?
Have you thought about keeping the business in the family? Will you sell the business to one of your managers? You could sell to the highest bidder or to the person who is best suited to taking over your legacy. Perhaps you have identified a competitor that would be interested in taking over your business and absorbing it into their own operations.
There are no right or wrong options only the option that is right for you.
There are many entrepreneurs who look towards building their business to the point where it will be acquired by an investor in order to scale it up or take it to the next level. This plan will allow you to cash in on your years of hard work.
Depending on your ideas for your exit from the business, you will probably prioritise different things as you build your business. So, even if you plan to run your business yourself for the foreseeable future, it can only be of benefit to have a clear idea of how you intend to eventually exit the business.
Why is it important?
Knowing what your exit strategy will be in advance will affect the kind of business decisions that you make. The sooner you know where your business is heading, the better you can prepare for your desired outcome.
Some entrepreneurs will outline their exit strategy in their initial business plan so that they can keep themselves on course for the entirety of the business’s existence. Having this plan in place will play a role in ensuring you get the maximum value when you sell.
Most entrepreneurs only think about growing the business, but it is the exit strategy that will really define the pay-out from your investment in the business.
In order to keep your exit strategy relevant, it can be useful to have an idea of the value of your business intermittently so that you can adjust your actions accordingly. Do you need to cut costs? Focus on increasing sales? Don’t ever lose sight of your end goal.
If you have had an exit strategy for a while, preparing your business for sale should not be mammoth task. You should be ready to hand over the reins when the time comes.
By Jo Thornley, Head of Brand and Partnerships at Dynamis. Joining in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.