As a business owner considering the sale of your business, when do you wait and when do you push to sell? Here are some factors that may play into your decision on timing to sell.
Do you have a major event in the next 4-6 months? Wait. The result will materially impact the value of your business.
You just landed a solid, long-term contract with a Tier 1 customer that diversifies your customer base. You recently purchased and installed new equipment that allows you to quickly ramp up a new service offering. When faced with a timely opportunity that will positively impact the value of your business, it’s prudent to integrate these activities before you go to market, showing the additional revenue/diversification/performance generated by this new customer/equipment.
Is your business on a solid run rate over the past couple years and you’ve been contemplating the right time? Push!
When your business is running on all cylinders and things are going well, it is the perfect time to market your business for sale. So often, we talk to sellers who say, “My business is doing great, why should I sell now? We’ve grown the past 5 years and our margins continue to expand, I think I’ll wait a few more years.” The challenge with this mindset is buyers want to buy into strength – when the business is consistently performing well. If you wait, only to experience a dip in performance or loss of a big customer, you’ll likely have to hold off another couple years for buyers to see you rebound from your dip and prove that the business is still steady and reliable.
Don’t forget about the unknowns.
You never know when there will be a fire in your warehouse, death in the family, loss of a top customer or a new competitor infiltrating your market. Sellers who wait to sell may face an unexpected event causing them to miss out on their perfect window. We had a recent seller client who got a great price for his business, but felt he deserved more and the buyer walked. Later that year, the client lost their largest contract and their numbers are down about 25% year over year. It’s unlikely he’s receive an offer comparable to what he was offered last year. If a buyer offers fair price and terms for your business, PUSH quickly!
Strike while the iron is hot.
The M&A industry is very active. You’re likely getting calls each month from buyers who are eager to buy your business. You know there is demand, so take advantage of it while the market is at its peak, buyers are paying great prices. We all know the nature of our economy and while we’ve rode a high for several years, it will contract and when it does, valuations will lower and businesses whose performance falters will have a tough road to get back to the valuations being offered today.
Make sure you know whether it’s time to wait or push.
If you’re considering the sale of your business or want an opinion on valuation, BAMA can help. Call us at 704-295-0102 for a free valuation consultation.