Being an entrepreneur is not just about running and starting businesses; it’s also about selling them. Many entrepreneurs forget this when they’re starting out, focusing heavily on coming up with great ideas and making strategic business decisions. The truth is that selling your business is as vital a part of any successful entrepreneur’s career as founding it.
But when do you know your business is ready to be sold? To prepare you for this entrepreneurial rite of passage, here is our guide to selling your business.
When should you sell your business?
Before you get onto the actual selling, it is vital to make sure you are selling your business at the right time. There are several ways to determine this:
1. When your business is very valuable
It goes without saying that you should sell your business when it is at its most valuable. But how do you know when this is? Sell too early and you could miss out on a huge payday. Leave it too late and potential buyers might lose interest, or (God forbid) business might go downhill. Tech Insider actually recommends erring towards selling too early. Reasons for this include the likelihood of more interested buyers when the price is lower, and the probability that you as founder will own a higher percentage of the business in the early stages.
Thankfully you don’t just have to use your best judgement to figure out the best time to sell.
There is a whole industry built up around evaluating the worth of businesses, with many companies you can work with to help you figure out a price. Some business valuation services, like OCS Retail Solutions’, will even help coordinate the transfer of ownership once a price has been agreed.
As Tech Insider advise, selling your business earlier rather than later can sometimes be your best bet, but ultimately other factors will weigh into the decision too. Once you think your business is valuable enough to sell, make sure it meets these other conditions before you shop it around.
2. When your business can survive without you
Selling a business that still needs you to run it day to day is a recipe for disaster. Put yourself in an acquirer’s position. You are approached by an entrepreneur with a business to sell you. It’s a good offer, so you look into their background. You find out that the last business this entrepreneur sold collapsed as soon as the new owners took over. Do you think you’ll have better luck? Is it worth the risk?
The answer is probably no. As an entrepreneur, selling your business might mean leaving it behind, but it’s in your interest that it continues to do well when you leave, if only to prove to future buyers that the business you offer them is a good investment.
3. When you want to move on
This is the most personal of the conditions that have to be right for you to sell a business. Entrepreneurship is all about seeking out new challenges and breaking new ground. This means it is inevitable that you will want to move from project to project over your career. It can be tempting to want to hang onto control of every business you start, but sometimes it is better to make a clean break and use the money you make in the sale to found new ventures.
Only you can decide when it’s time to move on from your business, so make sure you think carefully about it before you make the decision to sell.
4. When the market is right
You can’t sell a business if there are no buyers. Finding the right acquirer is much easier when the market is working in your favour. Seen similar businesses sell for big bucks? Now might be a good time to go.
Unfortunately for potential sellers, the business market can be turbulent. As Allan Siposs of FMV Capital told Entrepreneur, home improvement businesses were selling extremely well in 2006, but just a few years later many similar businesses that didn’t sell had lost a quarter of their value.