Why Timing Matters When You Sell Your Business
When you’re selling your business, countless factors influence the success of the sale. Timing is one of the most important.
Many business owners hear “timing” and immediately think of timing the market. That’s part of it, but the market shouldn’t be the only thing you consider when selling your company. Here’s a look at three important factors determining the timing of your sale — and why they matter.
Your Overall Energy and Motivation to Sell
If you’re thinking about selling your business, you’re probably examining your financials and your company’s overall performance. You may have already contacted business brokers to ask about valuations. But have you taken a look at yourself? If you’re feeling overwhelmed, tired, and burned out, you may not have the focus and energy needed to navigate a sale.
If you are an owner-operator or are otherwise an essential part of your company’s daily affairs, running the business while simultaneously trying to negotiate a sale can easily start to feel like having two (very demanding) jobs.
Working with a broker to sell your business can take some of the stress off, but don’t make the mistake of thinking that working with a broker means you can be completely hands-off.
Your Company’s Performance
Ideally, you’ll sell your business when it’s in a period of growth. If you’re in the midst of an upward trajectory, your company may still command a respectable price in a sluggish market. On the other hand, if your business shows no growth (or even worse, if it’s started to decline), you might struggle to sell it even when the market is hot.
Getting the timing right when it comes to business performance is harder than it sounds. That’s because many business owners try to push their company to peak performance before they sell.
It’s an understandable impulse. However, if you wait until your company is performing as well as it possibly can, that means you’ll be selling when your business has plateaued. It’s best to sell during a growth phase before you hit that plateau.
The Market
“The market” is a nebulous term, but in the context of selling a business, it usually refers to some or all of the following:
Current interest rates
Specific trends in your industry
Overall market sentiment and economic confidence
Competition among buyers
Analyzing multiple facets of the market can be difficult and confusing. Taking the market into consideration is important, but don’t make the mistake of waiting for the perfect market conditions to sell. That “perfect” time may never come, and you may miss outstanding sales opportunities in the process.
Is It Time to Sell Your Business?
Many business owners get stuck waiting for the very best time to sell their companies. Business brokers can look at your business, assess market conditions, and help you pick the right time to put your company on the market. Getting the timing right can be tricky, but you don’t have to decide when to pull the trigger on your own.
How Does a Business Broker Get a Better Price for My Business?
If you’re selling your business (or even just considering it), you might have heard people tell you to work with a business broker. You also might understandably hesitate — why hire someone and pay a commission when you could just sell your business yourself?
You may not realize that a good business broker can often get you a better price for your business. Even when you factor in the broker’s commission, you still end up with a larger profit than you would if you sold your business yourself.
How can a business broker convince a buyer to pay so much more? Here’s a closer look.
They Can Accurately Value Your Business
A business valuation calculator can give you a quick idea of what your business may be worth. However, when it comes to selling, you want your valuation to be as detailed and accurate as possible.
If you set the price too low, you could miss out on thousands. But if you set it too high, you’ll waste time marketing it before you realize you’ll need to drop the price.
Business brokers are experts at valuing businesses. They’re also attuned to market trends and know what features of a business may make it worth paying a premium for.
They Have Access to a Pool of Buyers
Business brokers will usually maintain a list of people who are actively looking to purchase businesses. More potential buyers generate more competition, and that puts you in a place to possibly receive offers above the asking price.
They’re Expert Negotiators
In virtually every case, selling a business involves negotiating the price, the terms and conditions of the sale, or both. If you aren’t experienced when it comes to negotiating the sale of a business, you might find this step hard to navigate. There’s also a very real possibility that you’ll lose money by agreeing to unreasonable terms.
When you work with a business broker, you’ll have an advocate during this critical process. Your business broker can handle negotiations for you while representing your best interests.
They Keep Everything Confidential
If you sell your business on your own, it’s nearly impossible to avoid the word getting out. If this happens, your employees may quit because they’re worried their jobs are in jeopardy. Your existing client base may be tempted to go elsewhere, and some of your trade secrets may be revealed.
Business brokers are experts at maintaining confidentiality throughout the sales process. When you work with one, you can avoid arousing suspicion — and all the complications that come with it.
Should You Hire a Business Broker?
Choosing whether you should work with a business broker is just one of the many decisions you’ll make as a part of selling your business. It’s not a decision you should make lightly — it’s a choice that can dramatically affect your business’s final sale price.
Ultimately, unless you already have extensive experience selling businesses, working with a broker makes the process easier and is also likely to get you the greatest profit.