The best time to sell your business, and why

If you’re considering selling your business, you’ve no doubt asked yourself “When is the best time to sell your business?”. The main driver behind this question is to maximise your profit from the business sale and ensure that your business can successfully operate in the future. This month, we thought we’d discuss this important question, as a strategic approach to maximising value prior to selling your business.

Market Conditions:

• Timing your business sale with favourable market conditions can significantly impact the ultimate sale price. During prosperous economic periods, buyers often have greater access to capital and may be willing to pay a premium for businesses that show growth potential. By monitoring market trends and industry performance, you can identify opportune moments to showcase your business for sale. Alongside this, be wary of competition. A surge in competition in your market or locality can affect the ‘edge’ you have in the market. Selling your business before high levels of competition flood the market could prove beneficial for you financially.

Business Performance:

• The performance and financial health of your business are imperative when deciding to sell. Optimal timing can be directly linked to achieving a strong track record of consistent growth, profitability, and stability. A potential buyer will assess these factors to gauge the long-term potential for business growth. Therefore, it is advisable to consider selling when your business is experiencing an upward trajectory, maximising its attractiveness to potential buyers. Now, this is where it gets interesting – because many business owners want to sell when they start to see a downward turn in profits (and we can’t blame them). But it’s important to sell on an upward trend (if possible) to help maximise the sale price.

Remember a buyer wants to feel comfortable that the earnings shown are maintainable into the future, so there should be a clear path to make them feel comfortable around that.

Personal Objectives and Lifestyle Changes:

• Personal circumstances can greatly influence the decision to sell a business. Various life events, such as retirement, relocation, or the pursuit of other ventures, may prompt an owner to evaluate a sale. By aligning your personal objectives with the sale of your business, you can ensure that the timing is right for you, both professionally and personally.

Succession Planning:

• Managing a smooth transition is vital for the long-term viability of your business. Often, family-owned businesses may aim to transition ownership to a successor within the family. Timing your sale to coincide with the readiness of the next generation to take over can maintain business continuity and preserve the legacy you built. Regardless of what style of succession plan you’ve put in place, creating a strong exit strategy is key to feeling prepared and ready for your next chapter. Click here to read our range of succession plan blogs to learn more.

Industry Dynamics:

• Knowledge of industry-specific cycles and factors can help determine the ideal time to sell. Industries experiencing rapid growth or disruptive changes may present lucrative opportunities for sellers. Additionally, it may be advantageous to sell your business while it still holds a competitive edge or unique value proposition that appeals to buyers seeking entry into your sector. The best way to find out? Research, research, research. Keep your finger on the pulse and try to stay one step ahead at all times. Trust us, you’ll thank yourself later.

Conclusion:

Deciding when to sell your business is a complex process that demands careful analysis and strategic thinking. By considering market conditions, business performance, personal objectives, succession planning, and industry dynamics, you can identify the opportune moment to maximise the value of your business. Timing your sale effectively will not only enhance your financial returns but also ensure a smooth transition for the future of your business. If you’d like to learn more about the business sale process, or perhaps explore what this journey looks like for you, contact the team at Core Business Brokers today, at (02) 9413 2977. Alternatively, you can email [email protected], [email protected] or [email protected] to learn more about the process, and how your business sale journey may unfold.