Deciding When to Sell a Business

by 30th of July, 2012

Deciding when to sell a business is a question that we commonly get asked. Should I advertise it this quarter? Should I wait until my busy season is over? Should I wait a year until my financials will be in better order? The list goes on...

We find it quiet common that people want to advertise a business for sale when either business is booming, they are ready for a new adventure or there’s a downward turn on sales.

Business Sale Scenario #1: Business is booming!

This is obviously the best time to sell a business as there are strong financials to back it up and you can project a solid growth going forward.

As a business owner you know all too well how important it is to impress a client. The same goes for a business sale. If business is booming – that is great news for a potential buyer! They will see growth, potential, a successful business and you will have more negotiating power especially if your business is seen as an emerging and developing business. Business buyers like the idea of walking into a business and projecting high sales in the first few years so that the money can be put towards paying the business loan or used as a healthy personal income.

Business Sale Scenario # 2: Business is stable, but you want out!

We see this often with people who are looking to retire, have run the same business for many years or looking to move. To sell a business that is stable gives you solid financials over the past few years, which is your main selling point. You will find this type of business sale can take some time to sell. It is an established business but isn’t seeing much growth. This is the safer option for buyers as they can see the owners income over the last few years, but doesn’t necessary compel the sale or have a “get it while its hot” approach.

Business Sale Scenario # 3: Business is on a downward trend, sell it now!

Business is having a few bad years and you want to up and sell your business before the sales get any worse. This is obviously the worst position to be in as a business seller.

What a potential buyer doesn’t want to see is a business that has become stagnant or is in a downward trend. Many business owners like a challenge but they don’t want a high business risk with little chance of return on investment. If your business is well established and there is a decrease in the profits, your ability to negotiate and impress potential buyers is limited. The usual reason we see this happen is the opening of competitive business nearby that have taken over part of the market share.

So it is important… to get the timing right and be prepared!

When your business is in a boom, you might not even think about selling it. If your making money and business is going well it, why would you want to offload it? True, but what if you end up in scenario C at some point and your options for sale are limited and the values decreased. It is our experience that business does take time to sell. Its not like real estate when a sale can happen in a couple of weeks. With business it can take months to over a year to find a buyer and sell a business for the price you want.

So always be prepared to sell your business!! Don’t wait until its too late! If your business is experiencing a downward turn, work hard to improve the sales and impress the potential buyer. With business loans competitive and hard to get in Australia at the moment, you need to have a business that banks will back with potential buyers.

Have you had experience selling a business? What condition was your business in when you put it on the market?