Should I Sell My Business?
The question of, “should I sell my business?” is perhaps one of the biggest choices you will face. Maybe your business is rapidly growing and market value is high, maybe you are facing burnout, thinking about retiring, or indecision simply has you feeling stuck. Whatever your situation and personal goals, we hope this guide helps you gain clarity.
Consider Your Goals
It is easy to get overwhelmed with the decision. To organize your thoughts, a good starting point is to ask yourself what your long-term goals are. Every business owner has a dream, whether that is to make enough money to never have to work again, leave a positive impact on employees’ and customers’ lives, or to simply enjoy growing the business. Everyone’s goals are unique, and they are often both financial and personal in nature.
It may take some time to identify your primary goals. However, this personal reflection is essential to making a smart decision. Once you understand your goals, the next step is to ask yourself, “would selling my business help me achieve those aspirations, or not?” While that question sounds simple, answering it can prove to be complex. Below, we will dive into when selling makes sense financially and personally, and when it might not.
Ask Yourself, “Do I Want To Sell my Business?”
This is the purely emotional side of the decision.While there is no denying money’s positive impact on our lives, it is helpful to step outside of finances for a moment. Ask yourself, would something be missing in my life if I sold my business? Some business owners simply love their jobs, and so can’t be “bought out.” It is important to determine if running the business fulfills a financial need, a personal need, or both. If staying on the payroll is crucial to your happiness, then perhaps no offer will be worth the exit.
Again, when considering fulfillment, it is crucial to keep the long-term focus. All of us need a break once in a while, but would you miss your company after a few weeks of beach time and sleeping in?
Business Owner Burnout
Many business owners face burnout at one time or another. When taking a vacation does not cure the burnout blues, it might be time to consider if there is a deeper cause at play. Burnout can happen for many reasons: mediocre employees, poor management, or simply owner fatigue. Sometimes burnout can be easily fixed with a change of policy or a hire that takes over the tasks you find annoying. But if making changes within the business does not help, the only cure may be selling and moving on to new ventures.
Should I Sell my Business and Retire?
If selling is the best option, the next step is to consider when.
Whether you are looking to be financially independent at retirement or far beforehand, everyone needs a certain amount of money to stop working. That amount is different for each person, but putting a number to it is necessary. If you have decided to sell, it is only logical to then try and sell for the highest possible value. However, this decision leads to another fork in the road: Do I cash in now, or wait in the hopes that my business is worth more in the future? The short answer is, like everything else, it depends. We will elaborate more on this below.
Should I Sell my Business or Keep It?
Making a decision based on an uncertain future is always a challenge. It is impossible to know if your business will continue to grow in value, or even decline. Jason Cohen discusses this dilemma in his blog Rich vs. King in the Real World: Why I Sold My Company. The essential choice is this: an immediate, known lump of cash, or an unknown amount at an unknown date. The unknown amount could even, if the market took a bad turn or a competitor washed you out, be almost zero.
It is easy to fall into the trap of “more is always better.” But Cohen questions, is it always? He demonstrates that money’s effect on your lifestyle is not linear. For everyone, there is an amount of money that fundamentally changes your life: once you reach it, you are free to do whatever you want with your time, forever. Thus he calls it the “freedom line.” If selling today could grant you access to the freedom line (and all its subsequent lifestyle changes), holding out for an additional sum may not be worth the risk. For many, freedom is priceless.
When Should I Sell my Business?
the ideal time to sell your business is when its value is rising. As value is based on business profits and outlook, rising sales and profits over time indicates an attractive investment for buyers. Understandably, this is also when business owners are tempted to hold onto the company. However, what comes up may come back down again— if even for the short term. The optimal time to sell is when your business and the industry are about to peak. While no one can predict the future, consulting with experts in your industry can shed some light on when the upward trend will reach its max.
In addition to industry cycles, there are also macroeconomic cycles to consider. Just as you should avoid selling when profits drop, you should also avoid selling in a recession.
When considering an acquisition, 1719 Partners looks at a company’s historical and projected performance – not just at its current situation. Because 1719’s investments are geared for the long-term, a brief stumble does not necessarily diminish the company’s merit.
When to Sell
Contrary to above, sometimes it is wise to sell in downward trends. When owners lose the energy or passion to keep pace with competition, or simply do not have the capital to keep up, company value can fall. When there is no future value rise in sight, it makes sense to sell as soon as possible to mitigate future losses. While 1719 Partners does not invest in turnaround situations, we regularly work with companies that have the potential to remain competitive, but need more capital to do so— that is often how we begin partnerships.
Consider your Options
1719 Partners understands the weight of this decision and that every owner’s situation is unique. If you would like to discuss what a full or partial sale of your business could look like, we would be happy to speak with you. Feel free to contact us here.
Should I Sell my Business FAQ
How Much Should I Sell my Business for?
A fair asking price for a business depends on many factors, such as financial wellness, growth potential, business size, and industry trends. Looking at sales of similar businesses is a good place to start. Consider also the EBITDA valuation method, which uses a company’s EBITDA multiple to determine its value. The EBITDA multiple is just one way to estimate a company’s asking price, but it is often used in merger and acquisition (M&A) transactions.
Should I use a Broker to Sell my Business?
The answer is it depends. A broker can save a business owner time, provide access to an exclusive network of buyers, and offer experience negotiating with buyers. All in all, using a broker can help ensure you are compensated fairly for your business sale. At the same time, if you already have a handful of interested buyers, want to be closely involved with marketing your business and the sale process, or want to avoid broker fees, it may make sense to not use a broker. For more information, see this blog.