Wondering how to sell your business and when the right time to exit a business is are natural question for a small business owner to have. The short answer to these questions is to begin the process 1-2 years before you want to sell your company, to allow room for the sale process. There are many factors that come into play when it comes time to exit your business that you can prepare for to better answer when the right time to sell your business is going to be. In the following article, we will help address this question more thoroughly.
Planning for a business exit is not commonly built into a small business owner’s strategy from the inception of their business, but in all honesty it should be. If a small business owner is prepared at all times for a business sale, than they will more than likely reap a more optimal return on their investment when they’re ready. This strategy will also position a small business owner well when coming up against unforeseen circumstances that they may need to sell their business fast to address. So the best time to prepare for a business sale is from day one.
Don’t fret if you haven’t planned your business exit yet, there is still time to prepare. Most business advisors suggest that small business owners will need three years of preparation prior to exiting their business. Three years allows time to clean up books and records, document processes & build standard operating procedures, and train a manager so you can remove yourself from the day to day of your business. All of these tasks will position your business well for your exit. They will also address the needs of your business broker who will require at least three years of profit & loss statements, and tax returns to evaluate your business and develop a price opinion. So three years out from a business exit can be an ideal place to start planning.
Another great consideration when asking when is the right time to sell a business is selling at the peak. Selling your business when it is doing well will translate to a much higher return on investment for you, especially if your number one concern is "How much is my business worth?" Waiting out a great growth period can mean trying to sell your business with falling profits, which can be difficult to do. If this article raised more questions about when the right time to sell your small business is, visit our website for more information or schedule a consultation with one of our brokers today.
Rachael Holstein has been the Marketing Manager for Transworld - Rocky Mountain since 2016. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle!