Knowing when to sell a business is half the battle.
As business owners, we want to reap the benefits of our businesses doing well for as long as possible. However, when you are planning a strategic exit it might be smart to sell at the peak of your business's performance. Although that seems counterintuitive it can be an ideal time to sell your business because of the three reasons we have outlined below.
Valuations of companies are typically based on the past three years of financial performance. If your company has had three strong years of business than its valuation will be high! Could it get even better? Yes, there is always that chance, but you risk having a slow growth year, or worse, a declining sales year. Both of these outcomes will significantly decrease the value of your company.
The company has strong momentum and if you expect it to continue, you will be setting the next owner up for success and a good transition. Besides it being the right thing to do, setting a buyer up for profitable years to come can mean a better chance of repayment on seller notes or a higher earn out if your deal structure includes either.
A strong financial performance opens more financing opportunities for buyers interested in acquiring your business! This will reduce the amount of or the likelihood that the deal will include a large percentage of seller financing. Ultimately, giving you more cash at the closing table. Many industries - and businesses - are at their peak performance right at this very moment!
Historically, we see seven-year economic cycles that have some blanket effect on all businesses, no matter their industry. The peak of this economic cycle is now making this the ideal time for owners that want to exit in the next 2 to 5 years to consider selling. Waiting to sell may mean waiting for another peak in the cycle seven to eight years down the road. Is that a risk you are willing to take?
If you are interested in speaking with one of our professional business brokers and wondering, "Should I sell my business?," please visit our website or schedule a complimentary consultation today!
About the Author
Jessica Fialkovich is an award winning business owner, small business advocate, and mergers & acquisitions expert. She’s the President of Transworld Business Advisors - Rocky Mountain and Transworld Commercial Real Estate working mainly with owners bringing in under $20 million in revenue who desire to build a legacy. To hear more from Jessica listen to her weekly podcast, The Deal Board on iTunes.