5 Signs It May Be Time to Sell Your Business
Having a long-term exit plan is one thing, but what are the signs that you should think about hanging out the for-sale sign in the near term? Experts cite the following:
1. Your competitors are being acquired. “Consolidation may be occurring, which means your competition will enjoy greater economies of scale and financing,” says Michael Blake, founder of
Arpeggio Advisors in Atlanta, Georgia. “That may make it more difficult for you to compete. On the positive side, it also means there’s a very good chance that sales prices for your kind of business are being driven up, and that a potential acquirer will be ready to do a deal much faster than buyers usually are.”
2. Your business is on an upward trend. “If you sell while business is on the rise, not at the peak, you leave something on the table for the potential owners, so they can see the growth opportunity,” says Troy Hazard, author of Future-Proofing Your Business, and an entrepreneur who has founded and sold several businesses.
3. Your focus is on preserving the business rather than growing it. “If you’re not in aggressive mode, someone else will be. The economy is changing so fast that there’s no such thing as simply maintaining what you have for the long term,” Blake says. “So if you’re unable or unwilling to embrace trends and innovation in your industry, take what you can out of the business and sell it to somebody else who is better positioned to realize its potential.”
4. A personal situation is taking too much attention away from the business. “If a change, such as health or family issues, demands so much of your time that you can’t run your business the way it needs to be run, you may be better off selling it, rather than letting it decline in value,” Blake says. “You can always get your capital out and wait for your life to realign so you can start a new business, and live to fight another day.”
5. The market is ripe. “Many owners plan to sell their business when they reach a certain age, or when the kids leave home. But they should also be doing regular temperature checks to see whether the market is good for their kind of business,” says Gregg Schor, CEO of mergers and acquisitions (M&A) advisory firm Protegrity Advisors in Ronkonkoma, New York. “Right now, there are many more well-funded buyers than there are quality sellers. That’s because private equity firms are increasingly interested in buying smaller, family-owned businesses.”
“Ask somebody who’s knowledgeable in the market—a business broker, an accountant, an M&A advisor—to do some research for you to see what similar businesses are selling for. You can always decide you’re not interested in selling, but at least you’ll be making an informed decision.”
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