When's the Right Time to Sell Your Company?

When’s the Right Time to Sell Your Company?

Some entrepreneurs start a business with the intention of growing old with it, while others create a business for the sole purpose of selling it on.

As a founder, you should have an exit strategy in mind from the day you start building your business. This article aims to discuss why some business owners sell their companies and also provide some tips on when the best time is to make this big decision.

REASONS WHY ENTREPRENEURS SELL UP

There are many reasons why some entrepreneurs create a business to sell it eventually. Here are some common ones:

  • Capitalisation

Most often, business owners sell their business because they’d simply like to pull out the capital they’ve made after years of hard work.

  • Relocation

Although some business owners manage to relocate their business as they go, there are others who sell their business instead and start over in a new location.

  • Poor performance

We all know that handling a business can be a struggle especially if it’s not performing well. Some owners find other ways to deal with the struggle, whereas some decide that enough is enough and eventually make the decision of selling their business to someone who can handle it better. 

  • Retirement

Retirement is the most common reason business owner’s of a certain age sell up. This usually happens when the retiree doesn’t have a next of kin to pass the business to, or personally prefers not to. Selling due to retirement provides ample time to properly plan and decide your exit strategy while achieving the maximum value for your business.If you’re looking to retire and are unsure of what to do with your business, let us give you some advice:

  • New opportunities

As a  business owner, it is normal to have a creative mind and eyes for opportunity. Sometimes entrepreneurs sell their business simply because they see better opportunities in a new place, or industry.

  • Health issues

Health issues are also a common reason for selling a business. Most small businesses are heavily reliant on the owner, therefore, when the owner is not fit to take care of it, no one else can. This results in selling the business to keep it open.

  • Business in demand

There may come a time when your business is performing very well and a buyer sees the opportunity to buy it off of you at a very good price. Sometimes, a good offer like that comes once in a lifetime and is hard to turn down.

HOW TO GET IT RIGHT FROM THE START

In order to have a high-value exit, you should plan well and in advance. Keep these tips in mind when planning your exit:

  • Avoid creating a business model that requires the need to constantly find new customers or projects in order to maintain turnover. E.g. Construction
  • As your company grows, resist the urge of getting tied to a long-term property lease unless your business is location-independent. Opt for renting a property instead to maintain flexibility.
  • Don’t dilute your control of the equity structure by offering shares to a third party.

Deciding to sell your business can be a big decision, if not anticipated from the start. However, if you plan it well by keeping your goals solid and the above tips in mind, you should be able to sell your business at a high value, while remaining well-prepared. 

About Sam P

EnterpriseZone Staff Writer

Leave a Reply