When to Sell Your Small Business: How to Tell It’s Time to Sell
When you are a business owner, you put a variety of investments into your business. These include money, time, and energy. In a sense, your business is almost like your own child, one you would sacrifice anything for to help them succeed.
Yet, at some point, you’ll probably need to sell the business. You can’t keep running the company from your grave, so eventually you’ll need to find a buyer. Picking the right time to sell your business is essential in order to get the most money for it. Here are some tips so you can recognize the best time to sell your business, and get the most benefit from the sale.
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What is Your Retirement Plan?
You need a clear end goal for your retirement, or else you may never retire. Retiring as a small business owner can get complicated, so having a set plan is necessary. Before you sell your business, you need to consider how this move would affect your retirement. Even if you aren’t planning to retire immediately after the sale, you still need a plan in place to determine your options for working after your business sells. If you do plan to use the proceeds as part of your retirement income, having a clear plan outlined is even more critical.
Consider, for example, if the flat sale of the business, after taxes and fees, will be enough to retire. It’s unlikely you’ll want to find a new job or start another company after selling your current one, so will you have enough to call it quits? Look at your current retirement savings and compare that number to an estimate for the sale of your business.
If it won’t be enough to retire, then it’s probably not a good time to sell. You’ll need to keep a normal income and make regular contributions to your retirement accounts for a while longer. Eventually, you’ll reach a point where the money you’ve saved combined with selling your business will be enough to retire on.
How Profitable is Your Business?
The profitability of your business plays a major role is whether it’s time to sell it, and how much money you can get for it. If your business isn’t turning a healthy profit, it will be hard to find a buyer, but if you are getting a massive profit regularly, you may not want to cut that revenue out of your life just yet. It’s important to try and sell your business when it hits regular profit earnings while still consistently growing.
A major part of deciding when to sell is seeing if there is a future for your business. Is your current business model going to remain profitable in a decade or more? If you are ready to step away and your business can successfully function and bring in money for decades to come, it might be a good time to sell.
Is There a Buyer for the Company?
Even if you aren’t actively looking to sell your company, buyers are likely to approach you. It’s especially likely to happen if you are shaking up an industry with a new idea or finding extraordinary success. Anytime you get an offer, seriously consider it.
If you’re finding unanticipated amounts of success and growing quickly, you might not be equipped to handle the expansion. Too much demand can cripple a small business, because it leads to hiring the wrong employees and trying to cut corners on the work. If your business is growing to fast for you to handle, a buyout could be a way to make some money and let a company better equipped take over. If you are confident you can handle the growth and not sacrifice quality, then keep with it, as you’ll potentially earn more money in the long run.
Anytime a buyer approaches you when you are not specifically looking to sell, it means you are doing something right. It might be a competitor that wants to drop major money to get rid of a threat, or a company looking to expand their services and see you as the best option. If the buyer gives you an offer, be sure to get your business properly valued by a professional so you can get the right amount of money.
Have You Valued Your Business for Sale?
How much is your business worth? Selling a business needs to be both a smart financial and mental choice for you. Find out how much your business is worth, either by doing the math yourself or hiring a business broker.
Many businesses bring in enough income for their owners and employees, but aren’t worth enough to sell. That’s ok, keep working away and look for ways to grow. On the flip side, maybe your profit margins are strong, but because of the state of the industry right now, your business is worth a lot more. Compare your current income potential to the value of the business to help decide when to sell.
Then, compare that worth with your current income and goals for the future. Maybe you aren’t ready to retire and looking to start a new project. Could the money from the sale be enough of a seed to start another company? Always look to the future and what that potential money could do for you.
Are You Willing to Sell?
The decision to sell isn’t just a financial one, it’s also a mental one. It’s likely you have poured your heart and soul into the business, and selling your business might feel like giving up a child.
Have you accomplished all that you wanted to with the business? Are you able to give up on your goals and dreams for a big pile of cash? How much is your aspirations worth, or are you ok living with some regrets?
On the flip side, maybe you are really looking forward to being done with the company. Don’t let that eagerness get you into trouble. Selling a business can take a lot of time and you want to get as much out of the deal as you can. Moving too quickly in the sale process could lead to mistakes or getting a bad deal.
When looking to sell your business, account for all of the points mentioned above. Make sure it’s the right decision, both for you mentally and financially. Seriously consider every offer you get (even if you aren’t actively looking to sell) and make sure you are set for the future.
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Ben Allen is a freelance content creator and digital marketer who believes in helping small businesses succeed. He spends his free time bragging about his two daughters, eating stuffed crust pizza, and playing video games.
This post was updated February 28, 2019. It was originally published March 5, 2018.