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The Best Time to Sell A Business

The Best Time to Sell A Business

Yearly there are nearly three quarter of a million small to medium sized businesses that change ownership. They are owner-operated businesses like retail shops, restaurants, gas station, print shops, landscapers, bookkeeping or accounting services or any number of local types of franchises.

Regardless of the type of business that you own, when the business is priced right and properly packaged, there is a buyer. Finding the right buyer and selling the business for the right price and terms takes time, work and lots of planning.

Sadly, many business owners miss the optimal time to sell the business; sometimes the business owner loses interest and the business ends up in decline, or the market changes or It requires significant owner capital to expand, or some other unplanned events occur that devalue the business and cause it to become unsellable.

As a business owner, your business is likely your most valuable asset. For many business owners, your business might be as much as 80% of your total net worth.

With such a large amount of your net worth and potentially your retirement, the business should carefully consider the right time to sell this asset.

Here are 5 things to consider when determining if now is the right time to sell your business.

  1. When the business is “making more money” than you imagined. Buyers want to buy businesses that are “looking good” on paper. This means they have positive year over year growth over the last 3 years.
  2. The economy is doing well. This is a time when buyers have confidence and the banks are most likely to lend.
  3. The interest rates are low. When interest rates are low buyers can afford to buy larger businesses.
  4. Before the owner is done. Often owners of businesses run the businesses until they cannot run them anymore. When a business owner waits too long, the business is often is decline and poorly operated. The best time is when the business is in its best condition.
  5. When the business is ready. Although this is a broad statement, consider the following criteria
    1. The financials are clean and void of personal expenses
    2. The operations are well run and well documented for a new owner
    3. The marketing is automated and predictable
    4. The seller is not a critical point in the business and can be replaced easily

If you have been thinking about selling your business and now is the right time, consult with a proven business broker that can properly guide you and package the business for the highest and best price.

Article provided by:

Kim Deas of Murphy Business & Financial Services