What is your business exit strategy? How do you know the right time to sell your business? Well, if you have a plan to sell your business in the future; or you are currently starting a business to sell? Then read on as I reveal five signs to know when to sell your small business.
If you are a small business owner, you have probably thought about eventually selling your business. Not everyone starts up a small business with the idea of selling it in mind, but it is always a possibility. After all, you are not going to run your business forever.
You will have to let go of your business someday for retirement so why not plan for it today rather than allow your business die abruptly. This is why a business exit strategy is one of the most important aspects of your business plan.
So when is it the right time to sell your business?
There is never a “best” time to sell your business, unless someone comes up to you with a cash offer that’s double your asking price. However, waiting for that to happen is like waiting on a cuckoo clock to lay an egg: it’s just not going to happen.
There are lots of “best” factors, or great factors, to look for, but selling your business, just like selling anything else, is going to come with risks as well. Here are ten factors that you should be aware of in order to lower the number of potential risks inherent to selling your business.
Exit Strategy: 10 Signs to Know When to Sell your Company
1. The market is strong
We have have been waiting long enough to weather through the storms of The Great Recession. The market is bouncing back, and depending on your particular sector, it’s doing better than ever. We have battened down the hatches long enough. It’s time to air out the place and get more people in the door. The market is getting stronger every day and it is getting closer and closer to the best time to sell your small business.
2. Capital Gains costs are down
Capital gains taxes really go a long way toward preventing one from selling off just about any asset. Up to 39% goes right into Uncle Sam’s pocket in most cases, which means that you are going to have to at least mark up your initial asking cost by that amount, if not more, in order to get your small business sold without the government taking half of your hard-earned money.
Luckily, now is a good time to sell that small business because cap gains costs are at a low point. Sell high and keep more of what you have earned. Take advantage of dips in the cap gains costs.
3. You are burnt out
Whether or not you love your job, or your business, there is always the possibility of getting burned out. Being dissatisfied with your job isn’t a sign of failure. It’s just a sign that you are ready to strike out in a new direction. If you are feeling burnt out with your small business, there is no better time to hit the reset button on your life and either retire with your proceeds from the sale, or start up a new company that will put some fire in your blood.
4. Your small business is doing well
The first thought that comes to your mind once your business has just come off of a good year or a record high year isn’t “alright, now I should sell it!” However, that is pretty much the best time to actually sell your business. If you have ever seriously contemplated selling your business someday, there’s no time like the present if your business is doing well right now.
It’s not a bad idea to spend a little capital each year to get your business professionally valuated in order to track your business’s progress. When you think it’s reached its peak, or it’s breaking records, then that is the best time to sell.
5. You are ready to retire
You can’t continue running your business forever. You will have to quit when age starts telling you to do just that.The official retirement age isn’t getting any lower. As a small business owner, you have made more contributions to the nation’s workforce than most people ever do. You have created jobs and strengthened your local economy and you deserve to take advantage of that hard work before it’s too late.
Whether you are quickly approaching the retirement age, or you just want to spend more time with your family, you know when it’s best to retire. If your business is doing well, then that is the best time to cut ties and walk away with some much deserved dough.
If you would love to see your legacy continue, then you can hand over the reins to any of your relatives who might be interested in taking over the company. But if there are no such relatives, then you have to sell your business before old age catches up with you.
6. Your passion has flown out of the window
Owning and running a business is hard work. In fact, it involves a lot more hard work than working for someone else. And unless you have a strong passion for what you are doing, running your business will be like a big stick in your throat.
Passion is the fuel that keeps you going in the face of the harsh challenges that plague the world of business. And once you lose it, all the satisfaction and pleasure you derive from running the business disappear as well. Once that happens, it’s time to sell your business and move on to something else that will provide you with the satisfaction you want.
7. You have run dry of ideas
Standing out in the market usually requires a few changes and fresh ideas every now and then. This could entail offering new and amazing promotional products or completely redesigning your image. To implement new ideas consistently, you need to brainstorm often, and you need to have a large pool of ideas. There are times when you will be temporarily out of new ideas, but when this persists for a long time, it’s time to sell your business and call it quits.
8. Technology is running faster ahead of your business
If you run a business that requires constant technological updates that you are unable to keep up with, then it may be time to sell the business to someone who can. Today, virtually all business use some sort of technology like computers, software, the Internet, machines, robots, and so on.
Technology now advances rapidly and becomes obsolete within shorter and shorter periods of time. Lagging too far behind necessary technological updates can land your business in a quicksand without an exit channel.
9. You have been consistently losing money
You are in business to make money. If your business keeps sapping you dry of cash when it should actually be fetching you more of it, then it’s time to sell it and move on. It’s quite normal for businesses to lose money during their first few months to years when they’re just getting off the ground. But if your business will never start generating profits even after that’s long overdue, find and use the exit door.
10. You don’t have any more money to invest
To grow your business, you need to keep investing time, effort, and money in it. Ideally, the money should be coming from your profits, but it could also entail turning to third party funders such as investors or loan-issuing institutions. If you ever come to a point where you no longer have money to invest in your business, especially before it starts fetching profits, then it’s time to sell it.
11. Your personal life is affecting your business
As a business owner, you need to understand how to balance business with personal life and commitments. If you are a mom, a college student, or a newly wed, managing your commitments and running a business at the same time can be very challenging.
If you have major life events happening, you may want to consider how they affect your business. If you are having personal issues that need more attention and that will deprive you of the time needed to face your business, it’s better to let the business go rather than leave it to dwindle.
12. Your inventory isn’t working
If you run a business that sells certain products and some of the items are spending too long on the shelves, it may be a signal that the market for those products has dried up. And you could easily fix that by investing in new items or launching a new and more aggressive advertising campaign, or even restructuring the whole business. If that is too expensive and there are no other options, then it’s time to just let go of the business.
13. You foresee a market downturn
Some products and services are evergreen; they have always been and will always be in huge demand. But there are also some products and services that lose their relevance with time, due to changing trends. If your business offers such products or services that will pale into insignificance in sometimes in the future, it’s a smart idea to sell your business when you sense that reality coming closer.
14. You get an unexpected offer
Sometimes, you will have everything going smoothly for business. And you will enjoy the business so much that you’d bet with anyone that you will never sell the business for even ten-fold of its worth. Then, an irresistible offer comes from a buyer willing to buy your business for more than ten-fold of its worth. In that case, think about the pros and cons of selling your beloved business. If you think it’s something you are comfortable with, then let it go, and enjoy your money afterwards.