Knowing When to Sell Your Business

Small business owners sell their businesses all the time. Every once in a while, they sell for the right reason, at the right time, and everything turns out well for them. However, more often than not, there is regret. According to a study by PwC, 75% of business owners are dissatisfied with the result of their exit. There could be a lot of different reasons for that dissatisfaction, but knowing when the best time to sell a business probably could have alleviated many of them.

Let’s look at some considerations for selling your business:

• You get an offer well above the company’s projected valuation – an offer you can’t refuse.
  These are the kind of small business sales that you read about, and that create buzz. For example, Facebook’s recent acquisition of WhatsApp, for the tidy sum of $19 billion dollars (yes, that is billion, with a “b”). While most of us know about Facebook, who the hell knew anything about WhatsApp? Obviously, Mark Zuckerberg and his people did, and the former founders / owners of WhatsApp signed off on the acquisition, and are now set for life.
  
  But please don’t start licking your chops right about now. This kind of deal does not happen very often, and it is folly to hope that it will magically happen with your business. Not trying to be rude here, just offering a dose of reality. So let’s move on to some more realistic considerations.
  
• Changes in your personal life will affect your business, and you need the extra money.
  The wrong time to decide to sell your business is when you really need to sell your business, due to life events that are not business-related. A divorce, a serious illness, a disabling accident to you or a loved one, gambling debts… you get the idea. I’m not saying that these types of matters are not as important as your business, but selling your business to resolve these issues will more than likely cause you to make an unsatisfactory deal. Ultimately, you will do what you have to do, to address whatever crisis you are facing. Just understand that this is probably the worst reason, business-wise, to sell a company.
  
• You look into the future, and see the writing on the wall.
  You feel that tough times are ahead in your industry. Evolution in technology or shifts in business or consumer needs may well render your company’s products and services obsolete, or at least less in demand. The value of your business may never be higher than it is now.
  
  You may also realize that global demographics are not in your favor. More and more Baby Boomers, who are retiring earlier, or find themselves unemployable, are starting small businesses. This could mean more competition in your industry. Smaller businesses, with less overhead, willing to do the work your company does, at a fraction of the cost. You may feel that you don’t need that aggravation, going forward.
  
• You see a more lucrative opportunity elsewhere.
  Your business may be too small to ever be big, and you've got some big ideas. The more you've learned about business, the more you understand the limitations of certain industries or companies. You want to accomplish more, and you know your current organization will not get you there. The neighborhood bodega is not going to evolve into a gourmet wine and cheese shop with an international clientele. So selling your small business may give you the financial leverage to get into a bigger game, where your ideas can really develop.
  
• Your company is growing faster than you can fund it.
  Your business may be getting too big to be small, and it is more than you can handle. While you are grateful for the success you've been able to achieve, you realize that you are having difficulty in keeping up with customer demand. You don’t want your reputation for quality and service to suffer, but trying to satisfy a huge influx of business may not be your strength. All of your instincts tell you not to turn away business, but you begin to think that maybe a larger organization could better handle the growing customer base.
  
• Your business is no longer fun, or interesting to you.
  When you started your business, you had a reason. It could have been your love of the industry, or a great idea you had for a product, or maybe you just enjoyed being a contributing member of the business community in your town or state. But it had to have been a good reason; people don’t go through the effort of starting and maintaining a business just for the hell of it. But whatever the reasons you had for starting the company, let’s just say, to quote B.B. King, “the thrill is gone.” If your heart is just not in it anymore, perhaps it is time to let someone else take it off your hands. You’re not getting any younger, and maybe selling the business is a good way to secure a comfortable retirement and diversify your wealth.
  
• Ultimately, the best time to sell your business is when the company and its sales are peaking.
  The best way to ensure getting good value for the organization that you have poured your life’s blood into is to take full advantage of the success it has shown. You've created a company that has strong management, and runs effectively without you overseeing every detail. Sales are strong, customers are happy, employees are engaged. This is the kind of business that is very attractive to buyers, and will command the best price.

The bottom line here is to start thinking and planning the sale of the company a few years before actually doing it. The stronger the organization is, the more you will be compensated for it. Unless, of course, Mark Zuckerberg comes snooping around.