When is the right time to sell a business?

Building up a business takes time and it’s not an easy decision to sell, but it also isn’t an easy decision to find the right time to sell. There are many reasons why you may be looking to sell - the company may be on the verge of growth but needs someone new, or the risks are no longer worth the rewards. It may also be that personal circumstances mean you are no longer able to devote the time and effort to manage and grow the business.

So, the question of the hour: what is the right time to sell a business? Before we go any further, let’s reverse-engineer this and first talk about the reasons why not to sell your business.

Reasons not to sell your business
If your business is not doing well or has other problems, this is definitely not the right time to sell. Say your business is suffering from a loss of interest from founders or there are personal differences between the management teams, an experienced buyer will figure it out. And you're not going to get the price you want.

On the flip side, you also don’t want to sell too early. Where business forecasts suggest massive gains to be made in the next quarter or so, it may be wise to hold off on the sale.

Another reason not to sell is your good old pal, the tax man. Expectations of future tax decreases or tax implications on a sale may also mean selling at a particular time is not advisable.

Now that we’ve cleared up the reasons why you shouldn’t sell your company, let’s look at the right time to sell your company.

A prosperous future
The best time to sell is actually when your company is doing well and promises a future of success with growing profits, reinvestment, employment opportunities and new markets.

Think about it this way, if a potential buyer approached you, would you be able to convince them of the success of your business? If the answer is yes, then you have a prosperous business that could bring you a great deal.

To determine how prosperous the future of your company could be, you can consider the following questions:
  • Are your products and/or services in demand?
  • Are there growth opportunities on your doorstep?
  • Is the bottom line healthy?

These questions are also relevant in determining whether you’re selling too early.

At the end of the day, a buyer will want evidence to show the company is worth their while. And if you can show the value of the company with the breadth of prospects (with facts and figures of course), you will be well on your way to making a nice sale.

The business can function without you
Many owners reach a time in their business where the challenges are minimal and the company has become self-functioning. There is little left to do, but with a fresh owner the business could experience a different type of growth.

What you have here is a healthy business with a wealth of opportunities for the new owner. This is definitely a good time to sell and you may in fact fetch an excellent price if marketed the right way.

The market is telling you to sell
A healthy business in a confident market is also at the right point to sell. But you do have to be careful in that you need to ask yourself whether the price in the market reflects the work and effort you’ve put into your business.

Generally, if interest rates are low, getting the finances for buying companies is more accessible. There is also now more awareness about the lucrative opportunities of small companies so watch the market and see what it's saying.

Keep your ear close to the ground but also put yourself in the buyer’s shoes. If your business is offering long term gains in a confident market, the odds are that you're looking at a great time to sell.