05/20/16

When Should You Sell Your Small Business

After spending years developing an idea and setting up a successful enterprise, you might decide at some point that it’s time to sell your small business. You might have a number of reasons why you make this decision, but whatever they may be, you need to choose the appropriate time to step away. But, what is the perfect time to look for a buyer? Read ahead and find out.

Wait for the Optimum Market Conditions

Every industry has its ups and downs and if your industry is going through a low phase, it is never advisable to sell. Wait for a market upturn when your business is showing good profits, a steady income and high volume of sales. Ensure that you have a good customer base and some long standing contracts. When your company is stable, and you’re likely to sell for a good price, that’s the right time to liquidate it.

For instance, take the home improvement industry that was flourishing in the year 2006. A few years down the line, businesses working in landscaping, roofing, home decor, and other similar lines lost a major part of their value. Owners looking to sell their companies were unable to get even three-quarters of the price they would have commanded in 2006.

Study the Projected Future

In a time of fast-changing technology, global marketing, and improving strategies for conducting business, you need to keep pace with evolving conditions to continue to make profits. If you feel, your company can match the sophistication and expertise that your competitors are offering, you could continue to keep it running. If you cannot, your customers are likely to move on to better and advanced products. In addition, you might find yourself competing with companies that have larger resources at their disposal for research, developing new products, and marketing. In such a scenario, if you receive an offer for an acquisition, it is advisable to sell out your small business and recover your investment.

Risks

Despite your best efforts to further develop your marketing strategies, you might find that the bulk of your sales is being absorbed by a single customer. If this single buyer accounts for more than 5% to 10% of your sales, the risk factor of your business rises. Losing this one customer could put your business in serious trouble. Further, you might find that the company operates optimally only in your presence. And, that the team or technology you have is dependent on your directions to function. In this situation, you could choose to sell the business. Chances are that you might not get a very profitable deal because of the risk factor involved. But, many owners offer to stay on as consultants after the sale for a short while until the company is stable.

Need for Finances

Sometimes businesses need fresh infusions of investment to grow and develop if they are to continue to remain competitive. You might find that the equipment you have needs updating or that you need to hire fresh talent for your operations. Your small business could be at a point when it must expand its customer base and diversify its products or go under. Raising finances is not always that easy. And, you might prefer not to sink more funds or borrow more finances for this venture. Thus, a better option would be to sell it to a buyer that can afford the infusions.

Better Career Prospects

Many good enterprises are started by owners with some interesting concept that forms the basis of the small business. Having set up your company, you might find a brand new concept that you want to devote your time and money to. And, you might feel that the existing company can do fine without you being around to manage it. Like many entrepreneurs, you could consider selling it and freeing up your time so as to pursue the new innovative ideas you have. Focusing on a new enterprise can be the ideal channel to release your creative energies. And, keep boredom at bay. Sometimes, entrepreneurs get an offer that is too good to pass up on. That could also be the right time to sell out.

Health Conditions

Setting up a brand new enterprise can be a tough and time-consuming task. As long as your health supports you, you can devote all your time and efforts towards building it. But, at some point in your life, you might feel that you’re working too hard and that you don’t have enough time to focus on your physical and mental health. Sometimes, work and the business you’ve created may not allow you enough time for your family, vacations, eating, exercising, and caring for yourself. When that happens, you need to rework your priorities and sell your small business for the sake of your personal happiness. Once you’re back on track, you can use your skills and expertise to create something new again.

Retirement

Having devoted the best years of your life towards creating and running your enterprise, you might feel that it’s time to retire and let new people take over the reins. If that is the case, choose a buyer that shares your vision and the ethos with which you started your company. If you can find one that will develop on the concepts with which you laid a sturdy foundation, that’s the right time to step down.

Other Issues

If you’ve been working with partners, sometimes you might have to deal with fallouts and differences of opinion with them. When your conflicts reach a stage where the stability of the company could be jeopardized, it is better to sell out the company. Consider selling to third parties or one of the partners can buy out the others.

Should you find yourself in any of these situations, consider them the opportune moment to liquidate your company and look for fresh opportunities on which to focus your energies.

 

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About the author

Tyler Heaps

Tyler is a member of the Lendio marketing team. He is passionate about digital marketing, small business, and helping small business owners succeed. Tyler is an outdoorsman and loves spending time with his family.

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