When is the Right Time to Sell MY Business?
As a professional intermediary, I am often asked:
"When should I sell my business?"
Although every business and every situation is different, I always give the business owner the same answer.
The best time to sell YOUR business is:
When the business is ready
and
When you are ready
and
When the market is ready!
As we all know, both the public and private markets have been very difficult for the last two years. But the underlying elements are now showing a few signs of changing. Financing constrictions, which changed the equation on the average cost of capital, have started to abate in a limited manner. The number of active strategic buyers, which had been reduced because of underlying business problems, is slowly increasing. These facts made it difficult, although not impossible, to get optimal results in the last 24 months. Since the market place appears to be changing, any business owner who is now personally ready to sell should focus on the things that can be done to effect a successful sale.
First, be sure you, the owner, are ready to sell. Second, prepare the business for sale. (Many, many businesses change ownership due to unplanned events or an unique opportunity.)
As a business owner, you can start with the following simple check list:
1. Improve Performance: Don't wait to make any hard decisions. (New buyers do not really want to take control and face a round of cuts.) Fix problems, drop poor performing product lines, adjust overhead expenses, develop the best growth patterns in revenue and cash flow that are possible.
2. Act Quickly: If you are ready to sell, act now. Do not wait. Bad things happen when you wait...losing employees, or key customers, etc. The sales process is complex and time consuming. You do not want to squander management time during this critical period.
3. Plan and Execute an Extensive Buyer Search: There are active buyers in the market. Private Equity Groups have the funds to invest in the right opportunity. Individual managers from top companies are actively looking also. Plus international companies are increasingly active in the United States. Create a marketing plan that confidentially exposes the business to the maximum number of qualified buyers in a short time. (Many of these buyers can and will act quickly if you have a business that matches their investment criteria.)
4. Document Processes and Systems: Part of what makes a business function effectively and efficiently are the operating processes and formal and informal systems in daily use. Be sure to recognize the value that these system deliver to your business and to any future buyer. (Where necessary move immediately to improve any substandard system.)
5. Keep Your Key Employees Happy: Careful communication and good planning will help keep all of the key people in place. (There may be significant opportunities for each of them with a new owner.) Every owner needs the management team's help to complete a transaction. You need the team to operate the business effectively and to assist you in the sale process. Although everyone is theoretically replaceable, during or immediately after a sale is not the time.
6. Retain an Experienced M & A Specialist: The sale of a business is complex and time consuming. You, the business owner, need to run the business and improve performance during the sales process, which may take up to a year. Get help from an experienced professional who has access to the right parties, knows the market, and can guide you carefully along the way.
The right advisory team can effectively complete a sale even in a uniquely difficult deal environment. Start today to build your team and to plan for your exit from your business. This focus will permit you to prepare and time the sale of your business. Please remember it is your business and your decision.
You can Increase Your Wealth through the POWER of Your Business.