Why "Now is a Great Time to Sell Your Business" Might be Really Bad Advice

Step right up and see the show!  Seems every other day we're seeing an article screaming that now is the time.  You need to sell today or you're going to miss your chance.  Why?  Because "it's a great time to sell your business."  And it might be for some, but good timing has a lot more to do with your business than it does with what's going on in the economy.  

Here's a few real world reasons why it might not be the right time for you.  Reprinted with permission.  Original article by Clinton Lee here.

When’s The Right Time To Sell A Business?

There’s no shortage of articles this week on the subject of timing. But I’ve got a different take.

There’s an article in webretailer saying that now’s a good time to sell your company irrespective of which “stage” your company is in – from “startup” and “survival”  … all the way to “mature” establishments.

And there are half a dozen others including one from a UK business broker, BCMS. They write in NewburyToday that it is a sellers’ market.

With corporate acquisition activity approaching an all-time high – acquisition volumes have increased 22 per cent since the EU referendum – there is no doubt that now is a good time to sell.

No kidding. C’mon, guys. What you really mean to say is that now is always the best time for you and you don’t want the reader to postpone the decision because then you won’t get your big retainer 😉

What many brokers won’t tell you, of course, that the “best time” is going to vary from business to business. So I thought I’d spill the beans:

If you’ve had a couple of bad years …now is not a good time. For the best results you want a business that looks like it’s on the “up”. You want graphs sloping upwards indicating an increase in sales and profit.

If you’ve got an ongoing shareholder dispute, now’s not a good time. Sort out the dispute before going to market.

If the business is highly dependent on you, now’s not a good time. Are you hoping to convince the buyer that he can easily hire someone to replace you? Yeah, right. Every single other business seller who has painted himself into a corner like you have … has had the same idea. It’s wearing thin now. You really need to prove that it’s easy to replace you. Hire your substitute, train him/her and then it’ll be a better time to sell.

If your business is facing some serious external threats, now’s not a good time. Buyers will likely spot those threats during due diligence and simply walk away. Or hit you badly on price. Instead, see your business through the choppy waters and then go to market. Your wallet will thank you.

If you’re a startup that hasn’t reached profitability, now’s not a good time. Nobody starts a business without expecting to make a profit at some point. If you’re leaving before hitting that profit you are basically bailing because you’ve realised that this wasn’t such a good idea after all. Or that it’s going to take a lot more capital/talent/time than you anticipated. Sure, you’ll try to argue that something else has come up. Or that you’ve had some bad health. Or that your other business has become busy and requires your full attention. Buyers have heard all those stories … and even more original ones than those. They aren’t fooled. You are bailing. My suggestion: hit break-even, shoot into profit, then try to find a buyer.

If you haven’t done some exit preparation, now’s not a good time. Sort out your books, get rid of that aged stock taking up shelf space, spruce up the place. Going to market without some prior preparation will cost you money. Get yourself a good exit planning book, or hire an exit planner, and you’ll fare much better when you take your business to market.

Is now a good time to sell your business? I’ve no idea because I don’t know your business. But I do know a few hundred business brokers & business transfer agents who’ll swear that now is the best time.

Important: Get your advice from your accountant, your lawyer, your own research. Get it from anywhere. But do it before putting the question to a broker.

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