Most entrepreneurs spend so much time strategizing, creating, and managing their businesses that they rarely think about or prepare for their eventual exit. Owners naturally desire to sell their business when the market is at its peak and they are ready to retire. Yet the cycles of life and the markets rarely coincide. The danger is that a seller might have missed the best time to sell once their business or its sector reaches its peak or when market trends shift and growth is threatened.
Over the last couple of years you’ve kicked some tires, read a few articles or books, spoke to a few friends and maybe some professionals with experience in selling businesses. You might have asked how long does it take to sell a business or how much should I sell my business for? Maybe even thought when is it the time to sell your business or how long does it take to sell a business? Then you put it all on hold because selling your business was never a serious consideration. After all, you were still young.
We are going to discuss many of the queries which might arise in business owner’s minds in this article so that you get all the information and you can decide yourself when is it the time to sell your business. Let’s get started.
When Is It Time To Sell Your Business?
If you read the business press today, it is shocking the number of Boomer Aged Business Owners with no real plan to sell their business. In Canada it’s estimated there are 550,000 Boomer Aged Business Owners.
- Over 75% of you plan to sell within the next 10 years. That’s a lot of competition.
- Less than 10% of you have a team, formal exit or succession plan in place.
- Over 82% expect the sale of your business to fund your retirement. That’s a lot of pressure
Over the years I’ve worked directly with hundreds of owners of small and medium-sized businesses, like yourself, and spoken with many more.
It is disturbing to realize the number of entrepreneurs who don’t have a real exit strategy in place. There is no thought-out plan to sell or transition your business.
Additionally, there are a ton of business owners who are willing to sell their companies for much less than what they are worth, primarily because you don’t want to put in the effort to get the business ready for sale. You have no idea how to determine a company’s value or how to sell a business.
Let’s discuss all the main reasons which might make it the best time to sell the business.
New Business Interest
You may have developed a new interest in a different business or have chosen to turn a passion or hobby into a business. Serving two masters is never easy and the distraction can create havoc with both your personal and business lives.
Family and Personal Concerns
When you get to 50 or 60 years of age personal issues arise and must be dealt with. It could be an elderly parent that requires attention. Or a spouse who suddenly gets ill and needs you to be there physically and emotionally. The kids are not interested in taking over the company and even though that was your dream, it was not theirs. Perhaps your spouse has now retired and expects you to be free as well. Free to spend time together and enjoy the later years of life as a team.
Desire for More Personal Time
You could need more time for hobbies, interests, charity or simply to be with your grandchildren. You promised your spouse that when you retired travel was on the agenda. Growing or grown kids tend to require your attention as well.
Economic Environment
The economy has been a little crazy for the past few years. No one really knows what is going to happen. The only thing you can count on is change. And change can be for the good or not so good. Many decisions have been taken out of your hands by governments both yours and internationally. What worked so well for so many years and helped make you successful are no longer relevant.
Sales Growth
Increased sales can be a blessing and a curse. Chasing the sale and managing it can be exhausting. So are you prepared to continue running this race? You’ve likely kept the business a certain size because that is where you are comfortable. Does reaching outside your comfort zone at this age really appeal to you? Is growing sales on your bucket list of need to do items? Do you have staff to manage the growth? Is your facility capable of handling more work? Can your suppliers keep up with an increase in demand from you?
Leadership and Capital Needs
Do you have a management team? Is your team capable of taking on a higher level of new more complicated responsibilities? Can you afford to fund the growth? Do you really want to go to the bank and take on more risk? The days of taking risks and putting the house up for collateral are gone. Retirement is looming and you will need everything you can save. Because no one knows what surprises will show up and how much retirement will cost.
Your industry is Shrinking
It could be that the decision on selling your business is not just your choice. The industry that served you so well is changing, shrinking, not growing and now is the best time to get out. To quote an old cliche – nobody wants to be in the buggy whip business.
You’re Getting Distracted
The fun and excitement you experienced growing the business is no longer there. People outside the business want your attention. You look for reasons not to go in or you simply get in the habit of leaving early. Or the reasons just find you. It usually starts with working from home and then doing odd jobs around the office that you normally would not have taken on. The universe is dragging you away. Your interest in the company has reached an end. It’s time to get out.
Someone Has Offered to Buy Your Business
You got a call or an email from someone you don’t know. Saying they have a Buyer for your company. There is a long road between an email and selling a business. Rarely do these inquiries develop into a real sale. That said, it has gotten you thinking about selling. What would you do if they were serious? How much could you get? These and a hundred other questions will now fill your head.
Your Business Has Outgrown You
You did many right things including creating a great management team. The company is growing, in fact it seems to run without you. Your baby is in good hands. You are confident it will grow to become everything you imagined and more. At the same time it really doesn’t need you anymore.
You Are Heading Into Retirement
You knew it was coming and some of you have prepared well and others not. Either way retirement is imminent. You can put it off if you like. Or you can jump in a little early. Up to you. As you reach your 60’s and 70’s retirement becomes a centre of conversation. So are you retired yet? You working full time or easing back? What plans do you have for retirement? I know your wife/husband can’t wait for you to retire. It goes on and on. Decisions have to be made. Just know life really changes when you go from the head of the company to the retired guy or gal.
Conclusion
Is it time to sell? That depends on you. Where you are in your life, who is in your personal circle. Family and friends. Status of the company. Lot’s to consider. You will need to know what questions to ask. Where to get the answers and if you are like almost everyone who is selling a small or medium sized business. You’ve never done this before. It takes longer, is harder and costs more in time and money than you ever thought. So find some great advisors to help.
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FAQs
When should you sell out of a business?
When you are emotionally ready to go and not prepared to do any more work to increase the value of your business.
How do you know when it’s time to close your business?
Have an honest conversation with your Accountant, Business Coach and or Financial Advisor Coach. Accept the reality and if it’s time move on. If not keep going.
How do I value my company?
You can get a good idea from speaking with your Accountant, Business Broker, Sale Advisor or M&A Consultant. If you have a larger more valuable company and want a detailed assessment, hire the services of a Professional Licensed Valuator.
How do I close my business well?
To close your business properly. Make sure you are responsible and honest with yourself. Then think about the well being of your staff, suppliers and customers.
What are the reasons for closing a business?
You close a business when it is no longer capable of running profitably. Otherwise sell your business.
As a trusted business advisor and sale advisor I appreciate the opportunity to share my years of experience working with Owners just like you. In fact you may want to consider our online program Sell Your Business 4 More.