The best timing when selling your business is when the business: (a) has a proven track-record; (b) great operations; (c) good outlook; (d) and you yourself believe this is the right thing to do.
The 3 cornerstones that makes a great timing when selling your business:
- Your business does well, track-record is proven.
- Global economy and outlook look favorable.
- You yourself know what to do next.
A business can always be sold, and certain business sectors may be strong when others are weak.
Timing when selling your business is a factor to consider. Good timing means more potential buyers, a smoother transition process, less contractual covenant’s and higher valuations.
How important is timing when selling your business?
Honestly, you may not always be in charge to decide the right timing when selling your business. Many things affect the decision to exit a business, some of which might be out of your control.
However, to the extent possible try to time as many as possible of below five factors when selling your business. Doing so will make it easier, faster and more rewarding selling your business.
This is what we mean with great timing when selling your business:
- Revenue and earnings have grown steadily for the last three years. It’s a proven track-record.
- EBITDA-margins has been steady high for at least the last 3-years. A very important factor in valuation regardless how rosy your business outlook may be.
- Revenue and earnings outlook look promising for the next three to five years.
- Operations and internal processes are well functioning.
- Global economy is looking good with strong demand for your product or services.
Most buyer’s look for well-functioning businesses with great operations, a great team and a good outlook. Usually, buyers have an idea how to further develop the business, but most buyers would like to start from a solid platform.
Turn around businesses and business with earnings track record yet to be proven is being sold for a discount. Timing when selling your business is important. Prepare, deliver and try to time you exit and you will find it rewarding.
When is the right time to sell the company?
You shall consider the right time to sell the company if your fortunate enough to plan your exit. That is not always the case, but good timing makes a sell easier and at higher value.
However, the right time to sell the company may be different to different people. For example:
- Life situation changes, change of interest, or desire to retire.
- Business partners and co-investors looking for an exit.
- The company struggles with sales or earnings and you need cashflow from a normal job.
- You’re an operational hands-on person and the business grows and need new leadership.
- The company is ready for a next stage in development and you would like to opt another way.
Your personal reason to sell your business is important. In fact, its critical. Digest, think it through properly and you avoid any doubts or regrets afterward.
Once your decision to exit is made, you shall do necessary preparations and if possible, time the business and time the market.
- Time the business means that you have made yourself more or less redundant. You’re leaving the company when you sell your business and a buyer would pay more for the business if it continue to operate well without you. Make necessary hiring and delegation of responsibilities before you sell. Let go to value maximize.
- Time the market means that you like to sell when economy do well, the demand for your product is high and the order book is growing. That’s a great time to exit, if that’s your plan. Selling your business will be easier and generate higher value if you time the market.
The right time to sell the company is not always in your control. But, to the extent possible you shall try to control time timing when selling your business.
Consider favorable market conditions
You shall consider favorable market conditions because we all know that market conditions will affect the value of your business. So, what do we mean with great market conditions:
- When global and local economy do well, demand for products and services are usually high.
- Business outlooks are rosy and expectations for continued success is generally the common theme.
- Business sectors usually operate in cycles and market conditions are favorable for selling your business when you have the wind in your back.
It’s always easier to sell a company when there are favorable market conditions. Put yourself in a buyer’s shoes: There are so many uncertainties buying a business. Favorable market conditions with great economic outlook and strong demand are massively helpful when selling your business.
The value of your company will be at its best when there are favorable market conditions. This is one of the key considerations deciding upon timing when selling your business. Favorable market conditions mean’s great outlooks, which equal highest possible value of your business.
To sum up: timing when selling your business is important.
Great companies with proven track-record, great outlooks, stable earning’s and smooth operations are attractive, certainly if global economy does well.
Take your time, make your preparations and good luck.