Whenever I’m asked this question, I invariably answer that you need to begin actively marketing your business a MINIMUM of 2-3 years before you’re ready to walk out the door for the last time.
Also, to bring the best price, your business should ideally be on a strong growth trend, with the prospect of at least a couple more good years immediately ahead.
Unlike selling your home, which most people think should take no more than 90-120 days, selling a small- to medium-sized company can take up to 1 year, and sometimes much longer.
Finding the right buyer usually takes several months. Negotiating the definitive purchase agreement back and forth between the parties and their attorneys takes time. Completing the necessary due diligence takes time. Arranging the financing and actually closing the deal also takes time. Furthermore, once the deal closes, the seller is frequently required to spend from 1 month up to a couple of years in a training/ transitioning/ consulting role. While the seller will be compensated for his time, it nonetheless delays his departure.
Another factor in picking the right time to sell your business is the outlook for the US economy in general, and for your local economy and industry in particular. Buyers generally don’t like to buy when they sense the economy is headed into a recession. They generally prefer to stay on the sidelines and wait for the recession to “play through.”
Buyers also dislike periods of economic uncertainty, like presidential election years, because while the economy might be doing well right now, they’re just not certain what the future might bring, and they’d prefer to “wait and see.”
All of this suggests that the best time to begin actively selling your business might be sooner than you think.
If you know of a business owner who’s thinking of selling or buying a business and who might benefit from a free consultation with us, have them contact me, or any of the M&A professionals at www.bradwaygroup.com
By: Mike Ertel, Transworld M&A Advisors