The timing of the sale of your business is closely linked with the reasons for selling. The reasons why to sell a business can be personal, due to retirement or ill health, or led by the business cycle and your investment objectives.
Whilst personal reasons can be somewhat less controllable, if you are actively planning your exit for the future it is worth considering the timing of the sale of your business carefully. The timing of the sale process can make a significant difference to the value you achieve. Consider the following factors:
The economic cycle
Selling when the economy is on an upwards trajectory is certainly advisable; not only will your business hopefully be experiencing the growth, but buyers are confident and keen to invest in the growth. Having held back on acquisitions during the recession, many buyers are now cash rich and often have imperatives to acquire and build. We are certainly experiencing this in the current market and are seeing higher valuation multiples for our sale mandates.
Your business cycle
Being a specialist brokerage we work with businesses which operate within a niche market sector. As such these niche businesses often buck the trend of the economic cycle. Regardless of the general economic climate it is important to sell when your business is on a steady upwards trajectory. The best time to sell your business is when it has a strong track record of steady growth over the past 3-4 years. A track record of varying revenues and profits or even a downwards trend will certainly impact the valuation multiple achieved.
Your personal cycle
The best time to sell your business is when you do not have to. This puts you in a much stronger position when it comes to negotiating offers from prospective buyers as the alternative is to stay put. It is harder to achieve optimum value on the sale when you are past retirement age or once you have simply lost interest in the business, as it will often show in the financial performance of the business. If retirement is your reason for selling it is worth planning ahead and being prepared to retire earlier.
Hornblower are proven experts in the sale of owner managed businesses – having sold 80% of the sale mandates we have taken on since the start of 2013. As well as doing the job of marketing and brokering deals well, a large part of our success comes from working with business owners ahead of time to make sure they are prepared for the sale and that the time is right.
If you are contemplating the sale of your business, we would be delighted to arrange a free appraisal with you to assess the current market value, what action is required to prepare for the sale and improve the value, and answer the question: Is now the right time to sell your business?
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