Selling a business is one of the most important financial decisions you will ever make. Here are five indications that it might be the right time to plan an exit strategy for your business:
1. Industry trends. Rapidly changing technology and business trends can impact your business. The key is being able to recognize these trends and ensure you have the proper plan in place to deal with them. A failure to adapt can erode sales, margins and ultimately the value of your business.
2. Profitable business. If the business is growing profitably, maybe it’s time to sell. This enables you to maximize the price for your business and will likely reduce the time your business is on the market. This is especially important if you anticipate changes in the marketplace which may impact the costs of doing business.
3. Market conditions. Buyers will compete with themselves for good businesses on the market. If the market is strong, interest rates are quite often low and there is an abundance of capital available, making it easier for buyers to access financing. A strong market can also be present due to a differentiated product offering or a lack of competitors in the marketplace.
4. Personal motivations. There are many non-business reasons for selling your business. These can include retirement of an owner or key manager, health problems, divorce, a desire to try something new, a lack of heirs, or even a death of an owner.
5. Strategic business factors. The business may be in need of capital for expansion or in the process of gaining access to new technology or distribution channels. As an owner, you may consider selling part of your company in order to raise capital to expand or diversify. The right buyer may be able to provide the resources needed to sustain growth.
Don’t forget to start planning early – at least two years before you plan to exit your business! An M&A advisor can provide the experience and knowledge to ensure the best possible outcome for you and your business.
Kyle Parkman, Senior Advisor