Knowing when to sell your business is not an exact science. Like deciding when to sell a stock, you need to combine some intuition with analytic talent. Both skills can be honed and learned. If you have arrived at any of the following life milestones, it may be time to seriously consider selling your company:
1. A new business opportunity has arrived
It’s perhaps easiest to take the plunge and sell when a new opportunity arises. If your small chain of home repair stores has reached a plateau and you receive a lucrative offer from Lowe’s, it might be best to take the deal. Or maybe the economy is shifting towards a new technology that presents an exciting new direction. If you’re confident that you can capitalize on future trends, then adapting and shifting from one business to another may be a good idea.
2. Selling will create a path to retirement
If you’re close to the end of your working life, usually five years from when you want to retire, and selling your business would create a windfall that pays for your retirement, go for it! This would help in adding funds in conjunction with your retirement savings.
Make sure to base your decision on the math. If the sale won’t generate a large enough one-time pay-out, it may be worth waiting a year or two before selling.
If you plan to sell your business internally, start your succession planning earlier rather than later!
3. Your business has grown so large that selling a part of it makes sense
If you have had a long growth period, selling off a portion of the company could be a great idea. A partial sale of a medium-sized enterprise could lead to a nice payday that could be used for other expenses. Although a sale of this type would reduce your percentage ownership, you may still be able to maintain a majority share. Consider having a business valuation conducted to determine how much it is worth.
4. Your risk profile has changed
If your life circumstances have changed since you started your business, you might not be willing to handle the same level of risk anymore. This often happens to young entrepreneurs who prefer more security as they grow their families.
5. The long-term prospects of the company are bleak
Chances are that you don’t have a monopoly in your industry. If you analyze the competition and conclude that your company isn’t going to survive long-term, it may be best to sell your company early while you can still get a good price.
6. You’re no longer passionate about the business
If your excitement for your business or industry has declined over the years, it could be time to bow out. Founders may find their roles alter as their companies mature and evolve, and these changes can cause disillusionment or burnout. Rather than underperforming in your current role, it may better to leave.
Remember that every business venture should be started with an exit strategy in mind, and no company can be managed forever. Knowing when to get in and when to get out, and managing that journey wisely, will lead to a happier life both at home and at work.
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Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Advisory services offered through Glass Jacobson Investment Advisors, LLC. Glass Jacobson Investment Advisors is not affiliated with Triad Advisors, LLC.
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