How do I know it’s the right time to sell my business?
One of the most common questions we’re asked is: when should I sell my business? And the answer isn’t straightforward. The biggest misconception on one side is that businesses only sell when they are not doing well, the other side of the argument is that if a business is doing so well… Why would you sell?
The long and the short of the story is that there is never a good time to sell a business! Just like there never seems to be a good time to have babies, have lunch in a busy work schedule or getting your car serviced.
So, all the arguments aside; when IS the best time to sell your business?
Like any other commodity, business sales are driven by supply and demand. In a bad economy we see a demand for owner operator (job like) businesses and when the economy is good people look to get a higher return on investment than the bank can give them (or property which is not everyone’s cup of tea).
When selling a business you are dependent on the market you are working in, the demand created by external forces and you are dependent on what the purchaser want. To make your business as appealing as possible (and standing out from the other many businesses on the market) you have the best chance to sell when your turnover and profits are increasing!
There are many businesses on the market. If your business doesn’t look good compared to others, it will reflect in the offer. It is not hard to see why people want to own their own business. Even though we (as business owners) the perception is often completely wrong, they think of freedom not working for a boss, a better income, freedom with more time to spend with family…. Even though it is not the truth, these are the motivators for most aspiring business owners to be. But when push comes to shove, the real nature of buyers is that they actually look for reasons not to buy a business, rather than to find reasons to buy it.
Personally as a Business Broker I find January to March/April the best time to find buyers. People are looking for their New Year’s resolutions in January and I found that advertising businesses for sale in January/ February spikes the interest as lots of other brokers seem to go quiet over that time.
In my first year as a business broker I sold 3 businesses January through to March, in my second year 6 from February to June and last year I had 4 contracts in April. Most of the buyers started talking to us back in January or February/March, even if the business sold as late as June.
Starting the sales process in April is good but you want to make sure you have your accounts all ready as buyers expect to see what you have done in the last financial year. The previous year’s accounts are now 12 months old and might not reflect the business in its current state.
Starting in January, most buyers are happy to view management accounts to review.
And then, certainly in Northland, we have the seasonal businesses. These require exceptional timing. If you have a seasonal business you have to talk to us at the end of the summer (February – March). We should look at listing the business in July/August only to expect an offer in October or November. Do not list a seasonal business in November. It is too short timeframe to sell! It takes a month from signing an offer to finalise Due Diligence and settlement (at least!).
Why the hell am I telling you all this?! Maybe I have just talked you out of wanting to list your business? Don’t worry, I am busy enough. At least now you can make a good judgement call on your timing. My priority is to have you educated on the sale process before you sell. This makes the sale of your business much easier. The people that engage me early on in the process will tell you that the process was not as hard as they would have thought. It is often when people rush into selling a business that problems arise later on in the process.
Talk to us now to get the timing right. I will never charge for my advice and there are no obligations to list with us. I will prepare a free appraisal before any commitment is needed.