There are a few key considerations when deciding if now is the right time to sell a business. An owner must examine their personal goals and timeline. Are they ready to retire or pursue other ventures?
Next, they must evaluate the current state and valuation of the company. If business performance and profitability are strong, the valuation may be high, maximizing the sale price. If not, it’s best to wait.
Assess the economic climate and M&A market if you are considering selling your business. Are buyers actively acquiring in the industry? Overall, if the business goals have shifted and the numbers make sense, selling could provide an owner with liquidity and flexibility. However, don’t rush into a sale without carefully weighing all factors. Selling a business is a major decision requiring thorough analysis.
Cash Out and Realize Gains
If the business has grown over many years, selling allows you to reap the rewards of all your hard work and capture the full value created before market conditions change. The sale proceeds provide liquid capital that can be used to invest elsewhere, donate to charity, or fund retirement.
Avoid Future Risk and Uncertainty
The future brings potential changes in the economy, the industry, technology, customer preferences, and competitive landscape that could negatively impact your business operations and valuation. Selling locks in gains and removes the ongoing worries and risks of continued ownership.
Focus Energy Elsewhere
Running and growing a business takes huge amounts of time, effort, and mental bandwidth from owners. Selling frees up the schedule so you can shift your focus to other interests, spend more time with family, or pursue adventures and passions outside of work.
Bring in a New Level of Expertise
An acquirer may have greater access to capital, industry knowledge, systems, and talent that can take the business to the next level of growth and customers. Their capabilities and resources can build on the value the previous owners created.
Why You Shouldn’t Sell Your Business
While selling has its upsides, there are also good reasons not to sell.
The Value of the Business May Increase in the Future
If you have momentum and expect the business to continue growing and gaining value, it may make sense to hold on to it longer before selling. Doing so can maximize the eventual sale proceeds.
Sentimental Value
You’ve put years of blood, sweat, and tears into building the business. It becomes part of your identity and legacy. The emotional attachment and satisfaction of ongoing ownership may outweigh the financial reward of selling.
Loss of Control
The owner of a business has total control over the business’s mission, people, processes, and strategic direction. Once they sell, they will probably have much less influence over future decisions as the buyer takes over.
Lose Your Best Investment
Owning a successful, established business can be one of the best investments out there. The predictable cash flow and operations provide stable returns year after year, like a gift that keeps on giving.
Tax Consequences
The profit earned by selling a business will probably come with a hefty tax bill, especially if you have owned it for many years. Factor this into the net proceeds.
There are solid points on both sides of the sell vs. hold decision. Do thorough financial and personal reflection to weigh your specific situation and determine if now is the right time to sell the business or continue ownership. Consult trusted advisors for advice before making a decision regarding which option to take.