Should You Be Selling Your Company…Now?

The answer to the question asked in the title is, “It all depends!” There are all sorts of studies, surveys and the like suggesting that as more and more “baby-boomers” reach retirement age, the market will be flooded with companies for sale. The consensus is that with all these privately-held company owners reaching and nearing retirement age, the time to sell is now. In one survey, 57% of business owners said that their age was the motivating factor for exiting their business. In another survey, 75% of owners with revenues between $1 million and $150 million stated that they are looking to sell within the next three years. Reading all of this information, one gets the feeling that over the next few years a lot of privately-held businesses will be on the market.
While there are always going to be those who feel that Armageddon is coming, or that all of these companies are going to be on the market on the day that baby-boomer owners hit 65, there are some compelling reasons to sell your business now – and some reasons that may compel you to hold off. One good reason for any owner to sell “now” is that it just may be time to “smell the roses,” as they say. After running the business for so many years, “burn-out”, a common reason, is a very valid reason for selling. Many business owners may have, without actually realizing it, let their business slide a bit. You lose a customer or client here and there and don’t make the effort to replace them. Or, you don’t make the effort to check back with the supplier who has promised to give you a better price on an important product or service. It’s too easy to stick with the one you have been dealing with for years, even though you know the price is probably too high.
On the flip side, it is also easy to convince yourself that business is down a bit this year, maybe due to the current economy or recent legislation, likely reducing the value of the company. Maybe waiting until things pick up a bit and values increase would be a good idea. 35% of business owners, in one survey, said they were going to hold off selling because they felt their business would continue to grow and therefore, hopefully, also increase in value. Unfortunately, no one can predict the future. New competitors may enter your market. Foreign competition may move in. You may not have the energy or that “fire-in-the-belly” you once had, so the business may slide even further. Businesses are like stocks, they may go up but they could go down in value.
You could also point your finger to the tightening of credit and ask, “How is a buyer going to finance the business?” Despite very low interest rates, borrowing money to purchase a business is more difficult than you think.
There is an old saying that the time to plan your exit strategy is the day you start running the business. Business owners can’t outgrow interest rates, legislative changes or aging. The time to sell is when you are ready to sell. Also, an important item to factor in is the time it takes to sell a business. Preparing the business for sale, finding a buyer, going thru due diligence and escrow as well as a training or transition period. All of this can add up to a significant amount of time. The mere fact that you have read this far may be a sign that now is the time to sell. To learn more about current market trends, what your business might sell for, and what your next step might be, call us for a free consultation at 818-999-9621.

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