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Getting the Timing Right When Selling Your Business
It can be difficult to get the timing right when it comes to selling your business. It is possible to choose a good time to sell, such as when the economy is healthy and your business profits are up, but some factors are outside your control. Understanding what makes a good time to sell and having an exit plan can help you get your timing right.
There Isn't a Perfect Time
The first thing to know about timing is that there isn't a perfect time to sell your business. Knowing this at the outset can help ease stress for business owners because they won't keep looking for that ideal time. Some owners get stuck waiting for perfect conditions, such as a better market, a little more profit or one more big client. This may mean they miss their window altogether.
Having an exit plan can help you avoid this mistake. If you plan on selling your business, decide at the outset how many years you want to be in the business or the amount of yearly profits you want to be making when you sell. This helps you recognize your best time to sell and decreases your indecision.
Keep an Eye on the Market
In general, people want to acquire a business during a strong economy, so this is the market you're looking for when selling your business. In addition, banks need to be loaning people money for new business ventures so that prospective buyers can get financing. Selling a business becomes difficult when interest rates are high or banks aren't lending. A downturn in the economy may also affect your profits, which can harm the value of your business.
Also pay attention to the market in your industry. New technologies may make your business model obsolete, as happened with video rental stores. Make sure you understand how changes in your industry will affect the value of your business and your ability to sell.
If you're paying attention to the market, you can be ready to jump in when conditions are good or delay when the market is doing poorly. Business owners with an exit plan in place can make adjustments that take advantage of the prevailing conditions.
Don't Wait Until You Have to Sell
The most important factor when it comes to timing is to not wait until you must sell. If you're selling a business because profits are shrinking, this is going to lead to a lower valuation and less interest. Prospective buyers are rarely looking for a business that's in decline. Often owners in this situation have been waiting for the one client or extra profit and try to sell when it doesn't appear. Sticking to your exit plan can help you avoid this situation.
Selling When Conditions Aren't Great
Sometimes life gets in the way and you must sell while conditions aren't great. This may occur due to health concerns or a family emergency. Don't despair; you can still find buyers during a market slump if you know where to look. The offer may not be as high as you would receive with better market conditions, but if you take the time to maximize the value of your business, you can make a profit.
Speak to a Broker
Business brokers are experts at selling businesses. They understand the market at a macro level and the nuances of the local business environment. In addition, they pay attention to different industries and can give you advice on whether it's a good time to sell. If you're in a situation where you must sell, a business broker can show you how to maximize the value of your business, help you find a buyer and negotiate good terms, no matter the prevailing conditions.
It's always best to leave on a high when your business has good profits and potential for more rather than wait too long and try to sell when your business is shrinking. A good exit strategy and expert business broker can help you make the decision on the best time to sell. If you're thinking about selling your business, come speak with a LINK broker at one of our offices throughout the USA.