The Complete Guide to Selling a Business: Is Now the Right Time to Sell Your Business

Selling a business is a long and complex process. You may be ready to sell this year or just curious into what it will take to sell – this series will help. The business sale process can be broken down into core stages – from who you need to hire, to what questions you should be prepared to answer, to how to hand off your company once you’ve signed on the dotted line.

Step 5: Is Now the Right Time to Sell Your Business?

The reasons business owners start thinking about selling their companies are as varied as there are businesses. But, no matter the reason, owners should take a step back and conduct a holistic assessment of whether or not it truly is the right time to sell.

Changes in ownership are inevitable throughout a business’s lifecycle. When planned for, the transition can reinvigorate and renew a company’s mission, culture, values and productivity. But when it is mismanaged, an ownership change can destabilize financial performance, erode competitive market advantage, shake employee confidence and damage company culture.

By using a mix of best practices focused on leadership development, practical preparation, and rigorous assessment of the underlying fundamentals of a business and its current management improves the chances that an ownership transition will create value, rather than diminishing it.

Evaluate Your Company’s Fundamentals

• Leadership: Do you have the right people in the right positions to lead your company in the next phase of growth under the new owners? Prospective buyers will assess the executive leadership in the same way they would the selection of a new leader for any company. Before putting your company on the market, ask whether your company’s leadership is strong enough to withstand the scrutiny.
• Value Protection: Businesses in every industry need to find innovative solutions to challenges brought about by disruption in the forms of new technology, evolving business models and increasing customer expectations. In our current low-growth world characterized by frenetic change, potential buyers consider innovation a necessity.
• Innovation: Before the sale, foster a climate of innovation. Innovation doesn’t come about by sheer luck – rather it is the result of a disciplined, continuous improvement process with a focus on creating the highest customer and shareholder value.

The Three Determining Factors

1. Ownership has a highly compelling reason to exit the business. In some cases, current ownership may have personal reasons to exit. But at other times, owners simply need to pull liquidity out of a business to invest in an emerging opportunity. Or the owner may decide that the risk associated with the business has become too great. Investment projections may also play a role if the current owner isn’t seeing the desired rate of return.
2. Ownership is fairly confident their strategic goals will be met through a sale. This could depend on industry multiples or market factors, but in some cases owner can play an instrumental role in increasing the probability of success. The can a) value their company at or near a realistic number and b) employing a diligent and thorough process in marketing the company.
3. Ownership is mentally prepared to divest. Are you ready to exit the business you’ve worked so hard to build? Ambivalence on this front may negatively affect the exit planning process. To prepare yourself for divestiture, think about what you will spend your time doing after you’ve exited the business, and be realistic. If you’re used to working 12-hour days and find satisfaction in your work, you may not enjoy constant relaxation as much as you think. You might start a new business, dive into a beloved hobby or travel. Whatever it may be, crafting a plan will help make exiting your business easier.

Portions of this blog were taken from Axial Forum