How Do You Know When It’s Time To Sell Your Business?

May 22

How Do You Know When It’s Time To Sell Your Business?

If you’ve spent years building up a business, the thought of selling up may not sound very appealing. But you may not have realised that sometimes it’s more financially sensible to sell when things are going well, rather than when things start to go wrong and company voluntary arrangements become a topic of discussion.

Sell for the Right Reasons

Regardless of the financial motivations, if you’re thinking about selling your business you should always first take stock of any other reasons you may have for wanting to cash out. Sometimes, business owners may be motivated by personal issues that are influencing their decision. But you should never sell a business based on personal reasons alone. Unless the timing is right when you decide to sell, you will not get the best price.

There are many factors which can affect your business’ worth, and it’s important to account for all of them when thinking about selling. These include:

  • The state of the current buyer market.
  • Credit availability.
  • At what stage of its life cycle your business is at.

The Life Cycle of a Business

According to MoreBusiness, there are five distinct life stages which every business will pass through. Where your business is at in this cycle can have a distinct impact upon how it is valued. These five stages are: initial development, early growth, accelerated development, maturity and decline.

Depending at what stage your business is at, you will encounter a markedly different type of buyer when you decide to sell. Growing companies are primarily bought by investors who are looking to capitalise upon their profitability. Mature companies can be invigorated by purchasers whilst also providing valuable assets and experience. Even declining companies can be of value – a purchaser may wish to try to turn the business around, or dismantle it to repurpose valuable assets and personnel.

As we can see, there are many reasons for selling, and many reasons for why a purchaser would be interested in buying. The best time to sell your business is when your motivations, and the motivations of your buyers, are in alignment.

Handling the Sale of Your Business

To ensure that the sale of your business goes off smoothly, it’s important to make sure that you have given it the best chance possible. Invest in marketing, set yourself realistic price goals and make sure you comply with all financial and legal requirements pertaining to the sale of a business.