It can be challenging to decide when you want to sell your business. One business owner might declare, “When I reach 65, I will sell my business.” Unfortunately, many business owners don’t make it past 65 and must sell their businesses before they are ready.
The price you receive for your business can be affected by how old you are when you decide to sell it.
This is an example of what could happen. After 30 years of running her small business, a business owner decided she wanted to sell. Unfortunately, after 25 years of working in the industry, she was diagnosed with health problems and had to quit for five years. Slowly, the revenue declined as she became less able to manage the business. Her desire to continue running the business also waned. Unfortunately, the company was worth very little after its 30th anniversary. The business closed down after 30 years.
If she had planned for her exit, she would have seen signs and decided to let go after 25 years rather than waiting until the business was worthless in 30 years.
It is impossible to predict what tomorrow will bring. A plan to sell your company will help you make an informed decision before the company goes out of business.
A Plan to Sell Your Business
Here are five things you can do to increase the sale price of your company.
Decide what triggers you to sell. Each business has a lifecycle. If you want to sell your business at its peak, it is best to do so when the company has reached the end of its life cycle. Business owners often say this when they are making more than ever before. This is the time most business owners love their businesses most. This is the best time to sell your business. This strategy might be worth considering if you are serious about building your business to achieve maximum sales.
These triggers indicate that you are at the peak stage of your life cycle:
- There are few competitors
- A flourishing economic market
- Highest profits
- Rapid growth
As if you were selling tomorrow, prepare your business. After identifying the trigger and deciding to market your business, you must keep three to five years’ worth of tax returns. You don’t have the time or resources to maintain “clean” books if you don’t support them. To be “clean,” I mean to eliminate all non-essential write-offs. For example, the family’s annual trip to France to purchase new products. This can reduce the value of your company and increase your selling price.
Also, make sure you have a growth plan. You can ensure your top talent stays with your business if you know we will sell.
A business broker can help you prepare for the selling process.
To spot signs that you should sell, actively monitor the market environment. Many businesses missed the peak in 2007 and saw their business value decline during the Great Recession. The height is determined by which factors you are looking for, and these indicators should be actively sought out. You will lose the value of your company and your net.
Even though no one knows the right time, these steps will help you be ready for when your business sells.
Download the free report 7 Critical Points Every Business Owner Must Know Before Selling Your Business.