The right time to sell a business essentially means that it is the best time to sell for both the owner and the business. In other words, both parties will profit from the arrangement to a greater degree than they would if they carried on in the same vein.
Owners may find themselves in a position where they can now pursue other interests that bring them greater satisfaction in terms of time, energy and capital, while the business benefits from an injection of new blood.
In order to ascertain when that best moment to sell has arrived, owners need to be able to satisfy three conditions:
- Do they have a coercive or telling reason to sell?
- Can they achieve their sales objectives by proceeding with the transaction?
- Are they psychologically in the right place to give up control of their “baby” and be “relaxed” about seeing someone else in their place?
Compelling or persuasive reasons to sell may be personal, strategic or financial.
On a personal level, the reason could be something as simple as the owner feeling old age catching up, a falling-out with partners, long-term incapacitation of a loved one, or a feeling of being stressed and burned out.
In strategic terms, it could be that the owner has been at the helm for some time, but doesn’t feel equipped to take the business to the next stage of development. It could also be that the banks don’t share the vision of the owner and are reluctant to finance any further expansion. A further reason may be that the business is starting to decline and the owner needs to get out before things get too bad, or just give someone else the opportunity to turn it around.
Owners selling for financial reasons may do so in order to improve their own liquidity without increasing their own personal risk or jeopardizing the financial position of the business. On the other hand, they may want to reduce the personal liabilities brought into play by the personal guarantees that they had to give when raising the finance to start and run the business. Alternatively, it could be that the yield has not come up to expectation and it’s time to move on to pastures new.
For owners to achieve their sales objectives, they have to be sure that the sale is conducted in a professional manner, that the asking price is realistic and that the internal (company strength) and external (outlook for the product’s market and the health of the wider economy) factors are as favorable as they possibly can be.
Finally, the bond between a business and its owner should never be underestimated. A person who has lived, breathed and sweated a business for a number of years isn’t going to find it easy to let go, and even if they have a cogent reason to sell and are sure they can realize their objectives, they still have to satisfy the psychological yearnings that lie within.
Failure to deal with this particular aspect could lead to a disadvantageous sale due to interference from emotional distractions, or even litigation and claims for compensation from the would-be buyer should the owner believe he or she is ready to sell, but cannot summon up the courage to sign off the final agreement.
This article was contributed by BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis, the online media group also behind FranchiseSales.com and PropertySales.com
