As the owner of a business, you face a slew of tough decisions nearly every day. One question you may have asked yourself is whether you should sell your company. Several factors can influence your decision to sell, some of which you may not have even thought about. Here you will find a comprehensive list of possible reasons to help you decide if and when selling your business is right for you.
It's at a High Point
Over time, most businesses face different cycles of highs and lows, and potential buyers prefer to acquire companies that are thriving and have a positive future outlook. When your company is performing well, and profits are high, you can opt to sell to get the maximum value in a sale. You may not be ready to retire or move on, but if you sell at the right time, you can make the most money possible and pave the way for a more secure financial future. This can also help you avoid selling at a later date for less value, which would mean less money for your retirement.
If you are far from being ready to retire, there are ways to structure a deal to stay on with the company, working for the new owner and helping them grow the business. This can help you start the transition to your full exit. And in this case, if the business declines or an economic recession occurs, you do not face the risk of losing value because you got out at the right time.
Risk? You're Over It
Taking chances is inherent to owning and growing a business. And taking these risks are something you may have been more inclined to gamble with during the early stages of your company's lifecycle because you didn't have as much to lose. However, as your business thrives and increases in value, risk can seem even riskier, especially if you are getting older and closer to retiring. This can become exhausting to a point where you act so conservatively that it begins to impede growth opportunities, which can negatively impact your business valuation. Selling your company while it is doing well can help you get out while things are good and let someone else assume the burden of worrying about risks.
Revenues Are Down
Sometimes factors out of your control can impact your company's profitability, such as an economic downturn. This is when you should assess whether it is worth it to stick with it and see if you can weather the storm or choose to sell while there's still some value there and move on to your next act. It may simply be a matter of getting off a sinking ship before it's too late. In some cases, you may find buyers out there with the right resources to turn the business around.
Time for Change
You've built a successful business. Maybe you feel like your work here is done. But, sometimes, entrepreneurs can't shake that entrepreneurial spirit. Some don't even enjoy running the day-to-day of a company. If you find yourself itching to pursue other opportunities, it may be wise to sell so that you can focus on new ventures. Your company may be better off in the hands of someone who has the passion for running it while you profit from a sale and are freed up to start the next big thing.
You're Burnt Out
Running a business is hard work. It is fairly common for business owners to cite burnout as their reason for selling. Maybe you're tired of being kept from spending time with family. Maybe you feel like you can't maintain a personal life. Or maybe you feel that being consumed in work is having a negative impact on your health. These are all excellent reasons for considering a sale, especially if you find yourself neglecting your company out of fatigue and frustration. Again, it's better to sell when business are still good rather than waiting for things to go downhill.
Certain impending industry changes can affect the sale-ability of your business. This can include regulatory issues or new legislation, or new competition armed with innovation that will render your product or service less relevant. You will want to get ahead of these changes and sell your business while remaining transparent with buyers about the issues they may face in the future. Selling to a competitor could even be a solution that makes sense for both parties involved.
You Want to Relocate
Some business owners choose to sell their companies to move somewhere else geographically. This can be for family reasons, other business opportunities, or as part of a retirement plan. It is important to note that relocation could impact the timeframe of a sale and the transition period to new ownership. Therefore, you will need to plan carefully and clearly communicate those plans because it could affect the pricing of the company and the types of buyers that may be interested.
A "People" Void
If you are having a difficult time hiring the right people or retaining key talent, it is usually a sign of larger underlying problems with the company, indicating that it may be time to sell. Another indicator is if you are losing important clients or customers. This means something is wrong and the business needs new strategies and possibly new leadership.
A Need for Capital
You may reach a point when you simply need capital, whether it is to retire comfortably, to start a new venture, or you need cash to cover an emergency. You should keep in mind that it usually takes several months to sell a business so this shouldn't be considered a quick fix. But it can be a way to raise some capital if you need it, as long as you're prepared to be patient.
Planning for retirement is a common reason to sell a business. There are a few ways that you can go about this. You can sell the business outright to finance your nest egg. You can negotiate a partial sale to begin your transition. You can create a succession plan and leave the company to a family member. Or you can sell to an employee or a business partner. In any case, you should work with an M&A advisor to facilitate the best sale scenario for your needs properly.
The Importance of an Exit Plan
The bottom line is that business owners should always have a plan in place for exiting their investment, regardless of how close you are to retirement. It is simply a smart business decision because it protects both the owner and the business. It can also drive up the company valuation in a sale because proper preparations have already been established, and it shows that you're serious as a seller when the time is right.
At Benchmark International, our M&A experts can help you figure out if you are ready to sell your business, create an exit or succession plan, and find the right buyer. We look forward to starting the conversation about the possibilities that your future holds.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $8.25B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 14 offices across the world, have assisted thousands of owners with achieving their personal objectives and ensuring the continued growth of their businesses.