The Ideal Time to Sell:
Timing the sale of your business is not a one-size-fits-all proposition. Of course, all owners aspire to obtain a high price for their company but are sometimes forced to sell in less than perfect situations. For example, there may be a health or family-related issue driving a sale. If you need to sell due to one of these circumstances, our advisors will work with you to extract as much value as possible based on your business’ performance over the past three years and its near-term growth potential.
However, if you’re motivated to sell because you wish to retire or prefer to pursue new business ventures or personal interests, then think like a Wall Street investor and sell high! That is, plan to bring your business to market when trends are positive: sales are increasing, and margins are strong or expanding. The old M&A industry adage that “no one wants to catch a falling knife” never seems to go out of fashion.
Most buyers are not seeking distressed companies. Rather, buyers are looking for a low risk/reasonable return on their investment. Desirable buyers will be keen on understanding your business’ sustainability, growth prospects and a strong cash flow profile.
Here are five basic criteria you can use to determine whether this is the ideal time to sell your business. If you can answer “yes” to at least four of these questions…it’s safe to say you’re at or very close to ideal timing.
- Have sales increased steadily over the past 3-5 years?
- Is EBITDA growing or at least stable?
- Is your customer base expanding or purchasing more from you each year?
- Do you have a competitive market position?
- Do you have the team you need to bring the business to the next level?
Of course, there are many other elements and considerations to weigh before defining the best time to sell. A key concern is the value you receive for your business, which will depend on a myriad of factors. Once we’ve had a chance to review some basic information about your company, we can advise you as to what range of value you can expect.
Selling a little earlier than ideal is preferable to selling too late. Too late is when the business is in decline or there are particularly challenging external trends.
