As economic development professionals, we’re often asked this question. Unfortunately, there isn’t a one-size-fits-all answer because multiple factors can influence the timing of a sale.
The Entrepreneur
In business, as in life, it’s not all about money. The first question you should ask yourself before deciding to put your company on the market is: “Am I ready?” For many business owners, their company means a great deal to them. They work countless hours, feel proud of having built it up and creating jobs, and enjoy the prestige that ownership brings. Once the sale goes through, none of that will remain. Therefore, before making your decision, think about what you will do after you sell. Depending on your age, will the proceeds of the sale allow you to retire comfortably? If you want to stay active, what will you do—where will you work? These are questions you should carefully consider before moving forward with a sale.
Once you’ve made the decision to sell, here are some points that could help you get more for your business:
Operational Independence
The less your company depends on you to run, the easier it is to sell. It’s critical to remember that the buyer is purchasing your company, not your personal expertise. As soon as possible, start documenting operational procedures. Delegate tasks to members of your team. Aim to be more of a conductor than a one-man band. Beyond adding value to your company, this approach can mitigate risks in case of your injury or illness.
Selling a Company in Growth Mode
When a potential buyer assesses your business, they’ll look at your financial statements. If you’ve had rising sales figures for the past two or three years, it naturally appears more attractive to a buyer. As with any asset, a product or service on an upward trend draws more buyers than one in decline. Moreover, a business experiencing growth is generally easier for the buyer to finance. Of course, earnings before interest, taxes, depreciation, and amortization (EBITDA) should roughly follow your rising sales.
A Favorable Economic Climate
When the economy is stable (with relatively low interest rates and moderate inflation), people have more confidence and see many opportunities. Lenders also tend to be more confident, thanks to greater capital availability. Thus, the more money circulating in the market, the easier it should be to sell your company—likely at a better price as well.
If you’d like to discuss whether this is the right time to sell your business, don’t hesitate to contact us; we’d be happy to guide you through the process.
