Corporate Finance Services for your Business
When is the best time to sell my business?
At the first meeting with a potential client I am usually asked two questions. You can guess the first. The second is: “When is it the best time to sell my business?”
In essence the answer depends on your state of mind and the condition of the business. These two interrelated factors are similar to two lines on a graph; that is when they come together, then that is the best time to sell your business.
Likewise it is not a straightforward question to answer as it involves looking at two different facets the personal and commercial. Let’s look at these in more detail.
Please have a look at my Quiz elsewhere on the website. The answers to the questions may give you an idea as to how ready you are.
You might also like to consider your health, your family’s health and what you would do after the sale.
So far as the business is concerned then also look at the page on Exit Planning since this will give you an overview of the factors you need to consider in reaching the decision on whether now is the best time to sell your business.
Typically a business will have a growth curve that is inconsistent. It is characterised by periods of growth, slowing down, investment and growth.
Businesses need investments to stimulate growth and take them to the next level. There are many types of investment. It could be in people, equipment, IT, processes, systems, new products and new markets.
Whatever the type of investment there has to be a desire to take on the risk it will not produce the required return for the owners. Currently (August 2019), there is a dearth of investment by business since they do not know where the increase in consumer demand will come from and when it will materialise. We are currently half-way to a recession.
Yet without that investment, the business may well decline, fall behind its competitors or just flat line. Remember buyers are looking for growth or at least the potential. So it may be as well to let them take the risk rather than you. They will enjoy the upside unless a deal can be struck and you share in this at a later date.
Such a business therefore may not be attractive. Indeed I have known of businesses that have not received offers because of the lack of sales growth.
Likewise, if a business is perceived by the buyer to be at or near the top of the current growth curve and can see the need for further investment is required, then any offer is going to be tempered to this scenario reflecting the need for that investment.
Here are some more of the personal and commercial considerations.
- Emotional not commercial
- When you can, rather than when you have to
- When you have made up your mind
- Appetite for a reasonable handover period
- Taken it as far as you are prepared to go
- Do something else
- Deep down you do not have the skills
- When you have been approached
Sustainable level of revenue and profits
Business is sustainable without you
- Management Team run as if nothing changed
- Business plan with forecasts
- Growing levels of sales with more to come
- Brand value
- Leave something on the table for the buyer
- Growth, Plateau, Investment, Growth (?)
So when to make the call?
When do you press the button and instruct me to go ahead and start the process of marketing your business for sale.
You will see from the note on the website How long will it take that timing is an art and that to an extent you are not in control once Heads of Agreement have been signed.
You could say now (August 2019) is not a good time in view of the growing risk of a disorderly Brexit pulling down consumer confidence and spending on higher value goods such as cars.
The paper on Exit Planning helps here, however it could be argued that now is actually a good time to sell. Why so is this the case?
- Organic growth is not delivering enough shareholder value to the larger conglomerates.
- Private equity is awash with cash looking for a suitable home.
- There is less appetite for those risks facing you the owner and so a reluctance to take the next step.
- Low interest rates.
- Cybercrime and data protection where we are seeing the fines for breaches now being imposed e.g. British Airways.
- You can always sell up now and take the cash and some time off and come back in a couple of years and start another business with an exit plan in a few years’ time having learnt the lessons.
As you can see from this paper, the timing of the sale itself can be quiet crucial. Bearing in mind this process can takes months and moreover it is not something that can be rushed into. It requires a business that is sustainable without you the owner. In other words it has to be sellable in the first place. Moreover, it will mean the systems and processes are in place and you, the owner, are not working in the business.
If this paper is of interest to you then I would be very happy to chat it through with you and see if it is something that works for you and your company.
I look forward to hearing from you.
If you would like to read more of the Overview of Selling a Business, please return to this page on the website.
Andrew is the director of Assynt Corporate Finance Limited and an Accredited Member of the Association of Crowdfunding experts.
Previously a partner and head of corporate finance at Baker Watkin LLP, Andrew has more than 35 years of experience in all forms of corporate finance across many business sectors.
Andrew is also the Chair of Governors at a local school and an Assessor of Expeditions for The Duke of Edinburgh’s Award.
You can find out more and connect with Andrew over on LinkedIn.
Need Help? Contact Andrew at Assynt:
If you are serious about selling your business, contact Andrew to arrange an informal chat, in person or over the telephone to assess the options open to you.
You can also contact Andrew by email at: email@example.com or by completing the form on this page.