The right time to sell?

You’ve worked hard and built up a successful business, there’s an exit strategy firmly in place and all that’s left to decide is, when?

• When you need the money most?
• When you’re feeling exhausted and enough is enough?
• Sales are great but profit…not so much?

The answer is none of the above. In fact, these are the worst times to sell your business.

A disenfranchised owner who no longer has any passion for the business, poor profits and a company that needs cash just to stay afloat are hardly factors that will entice any potential buyer into parting with their cash.
There are numerous factors that will determine when it is the best for you to sell your business, such as the current market, profit history, valuation and growth projections. Under normal circumstances, the optimum time to sell your business will be when profits and sales are healthy and on an upward trend. Strong, projected profit figures will persuade any potential buyer to pay a higher price for your business whilst a legacy of good, financial performance will only enhance the buyer’s optimism in future earnings.

The value of your business today will be different from it’s valuation a year previously and similarly, a year in the future. That’s because the value of your business is fluid and affected by many external factors, some of which will be beyond your immediate control. Industry trends, interest rates, your competition and the current state of the economy are ever changing and could all potentially impact the value of your business.

Equally, there are a number of internal factors that will change within your business and, coupled with these external factors, will also affect your businesses valuation, sometimes adding value and sometimes de-valuing.
Given these considerations, how and when should you start objectively thinking about selling your business? Looking at the cycle of your business, the prime time to sell would be when your business is on an upward trajectory but not yet at the peak of its cycle. Experienced, potential buyers tend to make acquisitions when that ceiling has not yet been reached, leaving room for further growth still. Once a business is deemed to have reached it’s peak and enters a constant phase of sustainability, any potential acquisition may be done so on a price based on a greater risk factor and a potential downward trend.

That’s not to say there won’t be interested parties when your business is on the ‘other side’ of the peak, but in terms of an optimum time to sell it is without question when your business is on the way up.

With the looming retirement of ‘baby boomers’ over the next ten to 15 years, it is likely the market for selling SME’s will remain on solid footing for the foreseeable future. In addition, business acquisitions are increasingly being seen as offering a better ROI than many of the traditional investment channels, meaning a greater pool of potential investors.

Ultimately, the decision on when the best time to sell your business rests with you. Selling a business that you have invested so much time and effort into can be a daunting and scary prospect, so you’ll need to not only be prepared from a business perspective but also from an emotional standpoint.

Only once your business affairs are in good health and you are mentally prepared to sell, should you contact a business broker to ensure you achieve the best possible results.

If you need any advice or further information on selling your business or indeed making an acquisition, feel free to give us a call on 0845 337 3327 to speak to one of our consultants or email us at info@thebusinessboard.co.uk

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