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  • Writer's pictureJason Huett

When is the Best Time to Sell a Business?

Selling your business is one of the most impactful financial decisions you will make in your life. I would venture to say, THE most impactful decision. In this article, we will discuss the best time to sell your business, some of the timing pitfalls, and useful strategies to prepare for your sale.


Exit sign

Common Reasons Why Owners Sell


There are a myriad of reasons that owners sell their businesses — some are easily foreseeable, and other are not. In any case, being aware of the common precursors to a sale event only put you in a stronger position to deal with the known and unknown.


Personal Reasons

  1. Retirement: Many business owners sell their businesses as they approach retirement age.

  2. Unexpected Health Issues: Health problems can force owners to sell their businesses to focus on recovery.

  3. Boredom: Owners may want to pursue new opportunities or interests.

  4. Burnout: Running a business can be stressful, leading some owners to sell to alleviate the pressure and responsibility to managing operations.

  5. Divorce: Divorce is a common reason that business owners sell. Many times an owner will desire a "fresh start."

  6. Relocation: Let's face it, if you're located in an area that has harsh winters or extreme summers, relocation is a common reason to sell a business to move.


Financial Reasons

  1. Cash Out: Owners may want to liquidate their investment and enjoy the financial rewards.

  2. Debt or Financial Strain: Financial difficulties can force a sale to pay off debts or avoid additional losses.

  3. Market Conditions: Favorable market conditions can provide an opportunity to sell at a higher valuation.


Strategic Reasons

  1. Acquisition Offer: Receiving an attractive acquisition offer from another company.

  2. Partnership Disputes: Disagreements among business partners can lead to a decision to sell.

  3. Business Lifecycle: The business may have reached a stage where growth has plateaued, prompting a sale.

Operational Reasons

  1. No Successor: Absence of a suitable successor to take over the business.

  2. Industry Changes: Changes in the industry, such as increased competition or technological advancements, may make continuing operations less viable.

  3. Regulatory Changes: New regulations or legal challenges can make it difficult to continue operating profitably.

  4. Election Years: Every election cycle typically has come impact on the volume and types of businesses which are listed for sale. While this can be unnerving, many business owners have successful exits (and acquisitions) during election years.


If you scan this list, you will notice a common trend: many of the items on the list are endpoints. In other words, they're outcomes that built up over the years. For example, the owner of a traditional photography studio during the 1980s and 1990s could have had a booming business.


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However, once smartphones came to market in the early 2000s, the demand for traditional photography experienced a sharp decline. Although an owner may have decided to sell in the 2000s when the market was beginning its decline the events leading up to his or her decision was decades in the making.


A Real World Example


Early in my career I owned and operated a chain of martial arts schools. It was a great business, built on my passion around the martial arts. I launched the business in my early 20s and never planned to sell the business...until my daughter was born.


Almost instantaneously, my love for the business shifted. Whereas I had prided myself (and even enjoyed) working six days a week, I no longer had the desire to do so. I wanted to spend more time with my wife and daughter and I grew resentful towards working nights and weekends.


If you're an owner working inside your business, be open to knowing that your interests not only can change, but they're likely to change as you enter different phases of your life. By being open to this idea can allow you to plan more strategically for a future potential sale event.


Selling Your Business: Reactive versus Proactive


Before we talk about the best times to sell your business, let's cover the worst times to sell your business. From a strategic standpoint, there's two ways to sell your business:


Mode #1: Selling Reactively. Selling reactively is selling when you're backed into a corner. Events such as divorce, health issues, and negative cash flow all are examples of times when a buyer might need to react to a negative event in order to sell.


Obviously, there aren't ideal scenarios, but not all of them are under our control. The output of selling reactively is almost always a lower sale price and providing terms that are good for the buyer, but not good for you.


If you find yourself in this category, don't feel bad. Most business owners fall into this category (including myself many times).


Mode #2: Selling Proactively. On the flip side of the coin is selling your business proactively — strategically planning ahead 6 - 18 months to position your business for sale at the highest price and best terms for you.


Why wouldn't everyone take this route? It takes a lot more work to think and execute proactively, and truth-be-told, most business owners are too busy. However, the benefit of taking the proactive path is that it will improve your business. So, whether you sell or not, you're better off thinking in a strategic fashion because it will improve your business.


This is all sound nice, but let's dig into what proactive selling looks like. Here's a basic formula:


  1. Start with where your business is at - what do the financials currently look like? Based on the current financials, what is your business worth? Compare your answer to the answer of your Accountant, Business Broker, or other professional who might have some insight.

  2. This first step can be humbling. Most owners tend to overvalue their businesses and most buyers tend to undervalue businesses - it's reality. Assuming there's a gap between what you want to sell your business for and what it's currently worth, you now need a game plan to close the gap.

  3. This game plan could include leaning up expenses, rolling out new services to generate additional revenue, or a combination of tactics. If you're able to improve the operations such that the valuation is higher, you're stepping in the right direction.


The Best Time to Sell Your Business


By now, you're probably getting a sense of the best time to sell your business:

You will benefit from selling when....


  • You're selling proactively.

  • Your revenue is up.

  • Your profit is up.

  • The market and sector you're in are both up.

  • You would like to sell, but you don't need to sell.


Less than Ideal Times to Sell Your Business


These are examples of some of the less ideal times to sell your business:


  • You're reacting to an unexpected event, such as a negative change in health.

  • Your revenue or profit is down.

  • The market and sector you're in are contracting or becoming obsolete due to changes in culture or technology. Note: GenZ and AI are making this point a critical issue!

The Takeaway


Most business owners have thought through some aspects of the discussion above. However, very few plan ahead to make a strategic exit. If selling your business at some point in your career is important, it's critical to make time to think and document your strategy.


To your success,


Jason Huett CEO | CMO | Business Broker Collaborative Commercial, LLC.

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