When is the right time to sell my business?

It is amazing how often we hear this question. What is also amazing is that there is more than one meaning behind it. Owners typically mean one of two things when they ask that question:

What is the best time of year for selling a business?

For a company whose revenues come in pretty consistently throughout the year, timing is not that important. There is the dead zone that seems to occur between Thanksgiving and the New Year, but other than that, timing based on a calendar is immaterial.

If the company is seasonal in nature, however, the timing for coming to market is much more important. Who wants to buy a company that has already realized the majority of its profits for the year, particularly if that event occurs mid-summer? For seasonal companies, it is best to have the transaction completed at least a month before the busy period to allow for a smooth transition to occur before the desired selling frenzy begins. Keep in mind that selling a business does not happen overnight: on average it takes 4-6 months from the time the marketing process begins until a deal closes. That means if the summer or fall is your busy season, it is best to start the process at the beginning of the year.

In terms of my company’s growth, when is the best time to sell?

As you would have a guessed, a company with consistently growing revenues and an expanding bottom line will sell for a higher premium than one in decline. People like to buy companies that are doing well. If a company is doing well, and has a track record of 3-5 years of doing well, it is a great time to sell. Does that mean if a company hasn’t fared as well that it shouldn’t go on the market? Not at all, but the understanding has to be that the amount the owner will receive will be reduced based on the acquirers perceived risk involved in the transaction.

If a company has not had an ideal track record but can show growth over the last year and current financials demonstrate that the trend is continuing, it helps to allay the fears in the minds of potential buyers. Because of this fact we often recommend to sellers to hold on for one more year or so to improve the financial situation of the company. Many times the owners have let the business coast while they were dreaming of retirement. Only by building the steam back up can the full earning potential of the company be realized.

There are times when personal situations mean that waiting is simply not possible. Most businesses can be sold, but keep in mind, distressed businesses produce distressed sales prices. Depending upon the severity of the decline, it might mean a fire sale (selling off all the assets to the highest bidder and closing the doors). Often in those cases, being out from under the company responsibility has its own intrinsic rewards.

If you want to know if now is a good time to sell your business, give us a call. We can give you a free valuation range of your company’s current worth. If that fits in with what you need to move on with your life, it is a great time to sell. If it doesn’t, perhaps we can offer some suggestions on getting that number into your desired range.