Who Else Wants to Know When It Is Time To Sell A Business?

Unfortunately there is no universal rule that will tell when it is your time to sell a business. There are certainly some common areas that you can evaluate. But the emphasis that you place on each of them will be unique. Everyone else will do it a little differently.


Does this mean that it is not worth spending time thinking about it? Certainly not. It just means that each business owner will approach determining when it is time to sell his business from a unique perspective.


This discussion will ignore the circumstances where selling is dictated by circumstances beyond your control. You will recognize these when they confront you.


Two interrelated states will necessarily be part of your thinking. One is your age, and the other is your health. If you are approaching the age when you would like to do less, and you are still healthy, you could think about the combination of these circumstances that might trigger selling. Try to define this as precisely as you can. And remember it will be unique for you.


Another extremely important consideration is your enthusiasm for your business. If you have lost enthusiasm for your business, that may be a triggering event. If you have lost enthusiasm and have tried hard to rekindle it, but without success, it is likely time to sell. Let someone else have the business before its performance deteriorates from your lack of enthusiasm.


The general condition of business and economy, often related to the business cycle may help you decide. Would you rather sell and get top dollar as the business cycle peaks, or get less as the business cycle begins to recover. You know that it is not that simple, as your own industry and business my lead or lag the general cycle. But this will give you a starting point to begin formalizing your thinking about the time to sell a business. As you think about this, remember that picking absolute tops and bottoms is almost impossible.


Maturity in the growth of your industry is another factor to consider. Most industries go through periods of rapid growth, followed by a period of slow growth, and frequently contraction. Would you rather sell as industry growth begins to slow, or after it has slowed? This will be a very personal choice, as will the underlying considerations. However, you should be aware of these issues, and factor them into your planning.


Something frequently linked to industry maturity is the profit margin in your industry. During periods of rapid growth, profit margins are usually very attractive. Demand is usually growing faster than supply. However, high margins attract other suppliers so supply usually catches up with demand. That then causes decreased margins. This is another factor to consider in determining your own time to sell. Do you want to capture all of the attractive margins for yourself, or do you want to leave some for your buyer? It will have an impact on the price you can expect.


Apart from any of the above considerations, is your industry facing major changes that could impact your own ability to add value without retraining? If so you can certainly hire someone skilled to complement your own contribution. If that is going to alter your business economics significantly, this may give you a hint that it is time to sell. Particularly if there are prospective buyers available that already have the needed skill.


Personal considerations such as wanting to do something else, wanting to travel, etc. are obvious and need no further discussion. You already know how you want to deal with them in determining the time to sell a business.


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