It seems that more and more business owners are asking me that question these days. Given the recent “perfect storm” of collapsing financial markets, tighter credit, growing unemployment and a worsening economic recession, it’s a very fair question.
My answer is generally in two parts. First, for most business owners, determining the right time to sell your business depends upon a great many factors, including your health, your spouse’s health, your retirement plans and retirement savings, your management succession plan, the current financial health of your business and its immediate prospects for the future, and last but not least, the state of the overall economy, just to mention the most obvious factors. Clearly, this is not a question that can be answered without a careful analysis of many, interrelated factors. Equally clearly, there is no one time that is right for every company and owner.
The second part of my answer goes something like this: Now that the economy has started growing again – albeit more slowly than many would like – and now that credit lines for business acquisitions are more available – and still at historically low interest rates – this could be a particularly good time to sell your company.
While there is almost always a market for a really well run company with a proven track record of generating above average cash flows, and with bright prospects for continued future growth, most companies sales and cash flows have nearly returned to the high levels they achieved just before the Great Recession.
Strategic buyers and private equity groups both seem to be in a strong position to fund their deals and are actively looking to source new deals to add-on to their existing platforms and to form new platforms.
In view of the above, a better question might be: What can I be doing now to maximize the value of my company when I’m really ready to sell it?
We’ve addressed some specific strategies to maximize business value in previous articles; my point here is that this may be an ideal time, when the business is not yet stretched to its limits, to invest in actually implementing those value improvement ideas. As the economy continues to improve, most business owners will once again be so busy trying to keep up with the growing demand for their products and services that they will quickly complain that they simply don’t have the time to make needed improvements. This time around, commit to yourself that you won’t fall into that mental trap.
If you know of someone who’s thinking of selling or buying a business and who might benefit from a free, confidential, consultation with us, have them contact me at: email@example.com.
By: Mike Ertel, Transworld M&A Advisors