When is the best time to sell your business?

After many years of activity, the time has come when you think of selling your company?

You ask yourself: when is the best time to do it?

In fact, it is almost impossible to get this information. But you can look for a good time to sell.

Of course, the answer to this question cannot be so obvious since it depends on several factors: the circumstances, the situation of your company and the current market.

However, we can look at a number of general guidelines and thought processes that you can conduct and adapt to your situation to discover a good time to sell your business.

Here we provide you with a detailed guide that identifies practical considerations that you can apply to your own situation.

First, we will check some criteria that will allow us to confirm or not that your company is ready to be sold. Then, we will look at the signals related to the industry atmosphere and the market, which can be decisive, either encouraging you or totally the opposite by throwing a red flag.

It is imperative that you realize that there is no single factor that will tell you that it is the right time to sell. You will find that there are several factors, depending on each other, that may indicate a good time to sell.

Is your business ready to be sold?

When your business is in a growth phase with a relatively significant upward trend over the past few years, then it’s arguably a good time to sell. It is important for you to keep in mind that what determines a “significant growth trend” varies from industry to industry. However, the key element for all industries and for all buyers interested in your business is growth.

However, it is important that you are able to explain to your potential buyer in an understandable way that your business is profitable. This step will allow you to defend the price you are looking for once your business is on the market.

Besides, apart from your situation, it is always worth investing in marketing services to make your business even more remarkable and visible.

Once you have demonstrated that you are in a growth phase and that your business is profitable, you can determine at what price you can sell your business, to see if it fits your personal goals.

When your business has grown significantly, it may be time to consider selling it. Running a business is risky, and the bigger you are, the greater the risks you face. The value of your business is not liquid until you sell your business.

Successfully justifying that your business is in a growth phase will require a great deal of preparation. This preparation is extremely important, the better it is done, the more growth is justified and the better the value of your company will be. The calculation of the value of your company, which is based on multiple efforts, is often very different from the price the buyer is willing to pay.

Most of the time, managers of small and medium-sized companies turn to consulting firms in mergers & acquisitions or investment bankers, experts in the valuation of the company. Thanks to a comprehensible valuation made by specialists, the price at which you are ready to sell your company will be more defensible during negotiations with potential buyers.

Is the current market favorable to the sale of your business?

Certain market factors will always affect businesses for sale. This can work for you or against you.

In general, in order to get a better idea of the market forces that may impact you, you will need to ask yourself these two key questions:

• How many companies in your industry (similar in size and activity) have been sold or acquired recently?
• Are there any small companies that have been bought or acquired by larger ones?

It is always interesting, for several reasons, to review the history of business dispositions – similar to yours – over the past few years.

All right, this can help you get an idea of what your business will bring in. In fact, it will help you since it can tell you how much buyers actually paid for comparable businesses. This is just a general idea. Some information remains confidential, so you will certainly miss out on many details that can in some cases make the difference, which are often both the basis and the structure of a transaction.

Second, you can use these trends to identify valuable information. For example, if you operate a start-up, it will be interesting to monitor the number of acquisitions in your sector, as it gives you a clue that it might be the right time to sell your company. In case the number of transactions is high, it would be a priori interesting to sell at this time before an entrepreneurial wave of innovation emerges.

In general, there are a number of market factors that can give you a strong indication of a good time to sell, which are as follows:

• High volume of comparable sales to your company in your industry
• An upward trend in strategic acquisitions
• Lower interest rates than in previous years
• The possibility of obtaining loan financing

It may seem counterintuitive to sell when things are going well, but this is precisely the right time to sell. Most buyers are looking for a business that is in a growth phase, which is why it is in your best interest to sell at this time in your company’s life. In addition, the transaction can be completed more quickly.

Another important note: you don’t have to be discouraged because of a struggling economy, like during this health and economic crisis for example. This is especially true for companies that are looking for strategic acquisitions. Of course, when the economy is booming, acquirers will have the extra funds to invest in companies in a riskier way. However, in difficult times, their own profits may come under pressure, which may lead them to seek external growth through acquisitions.

Are you ready to sell your business?

The first thing to do at this point is to think about your financial security.

Do you have the financial security to make this decision?

The answer depends on each seller’s situation and priorities, which is why we recommend that you review your future goals and identify the financial needs you and other family members will need to achieve them. Even a simple writing exercise can help you do this.

However, if this type of preparation seems a little complex, the best thing to do is to contact a financial advisor, a specialist in the field, for help.

Once your financial security is assured, you may be a little too attached to your business, which you have brought into being and grown, perhaps even more than you realize since you have developed this business and invested a significant portion of your life in its success.

The big question at this point is, before you answer when is the best time to sell your business? Are you ready to walk away from your business without hesitation?

For those who have chosen to be an entrepreneur for life, this question will be fairly easy to answer. They will, no doubt, be ready for the next challenge, which they have probably already had in mind for some time: a next business to create, develop and sell.

For others, this process may not be so easy to manage.

If your business is old, you may not know what to do next. It may take an honest, personal assessment to analyze what motivates you most and how you can continue to satisfy that motivation in other ways.

Ultimately, understanding your motivations can help you avoid a major hurdle that some business owners face: burnout.

Be careful if you happen to feel burned out when it comes to running your business because the consequences can be severe. Burnout often leads to an anxious and immediate “need” to sell your business, which – in the end – produces a premature sale of your business at a price lower than it is actually worth.

Learn about the signs of burnout and don’t let it affect the proper compensation of everything you put into developing your business.

Thoughts: look for the right time, not the ideal time

Ultimately, there is no such thing as the perfect time to sell. In fact, even if it did, you would never know what the perfect time was until it was already past, making it impossible to spot until it was too late. All you can identify are the right times to sell. It’s important to note that most homeowners are looking for a general sign, before anything else, that makes them want to sell. We do not recommend this approach.

Rather, what you need to identify is a harmony of the three main factors we’ve discussed:

• Your company is ready to be sold
• The environment of your company can help you sell your business successfully
• You are ready to sell your business

At the end of the day, remember that most business owners do not finalize the sale of their business on their own. We can’t be good at everything: You’re an expert at building and running a business. You are not an expert in selling.

Selling a business is often a complicated task that requires technical skills and years of experience. It is therefore very beneficial to call on experts. They will help you optimize the sale of your business, allowing you to sleep peacefully at night.