shutterstock 109409330 resized 600There are several factors that you should consider when you determine the right time to sell your business:

  • The general marketplace for business transactions
  • Where your business is in its lifecycle
  • The current state of your business
  • Your personal goals as an owner

Let’s look at each of these factors and why they are important to your selling decision.

General Marketplace for Business Transactions

There are good and bad times to sell your business, and this is largely dictated by the state of our economy and the general marketplace for business transactions. In recessionary times, few businesses sell because they are doing poorly, values are depressed, and buyers are too cautious to invest. During economic recoveries, it is typically a buyer’s market since buyers are ready to invest, business profits are still recovering, but values have not fully recovered. Seller’s markets and the highest prices for the businesses are typically paid when the economy is realizing sustained multi-year growth.

Your Business Lifecycle

All businesses experience a lifecycle that includes start-up, growth, maturity, and decline. Some businesses experience a very rapid life cycle, and others a much longer life cycle. Owners need to view their businesses as investments and be vigilant about re-inventing as needed to continue to grow and stay healthy. The best time to sell your business is when it is growing. Owners that wait too long often miss out on finding a buyer for their business. Few owners want to buy businesses that do not have growth potential.

Current State of Your Business

What kind of shape is your business in? Are you financially healthy and profitable? Have your books been reviewed by a CPA? There are many drivers of business value beyond profits, and we discuss many of them in our “2013 Guide to Maximizing Business Value.” Strong management, market share, reputation, quality products and services, and documented processes and procedures are just a few of the things that buyers will review when they consider whether to buy your business and how much they are willing to pay. Sellers pay top dollar for high quality, and it can take years to prepare a business for sale.

Owner’s Personal Goals

Many owners think that the best time for them to sell is when they hit a certain age or when some personal goal is achieved, but the reality is that the economic cycles, your business life cycle, and the current state of our business will most likely determine the optimal timing for the sale. However, this doesn’t mean that owners should not identify their personal goals related the transition of their business. Quite the contrary. There are many goals, both financial and non-financial, that are unrelated to timing and are critical to having a successful ownership transition.