We are often asked, "When is the best time to sell a business?"
Just as often, we are asked, "How does one go about selling a business?"
We have assisted business owners in selling their businesses for literally decades, our collective experience spans literally hundreds of business sales in the aggregate, and we can therefore offer a few general observations on this subject and responses to these questions.
When is the best time to sell a business?
It is ideal/ optimal to sell a business when there is plenty of credit available to prospective business buyers to pay for the acquired business and when institutional buyers, for example private equity firms, are flush with cash. We are in just such a period as I write this, a period that exhibits all of these features. In that sense, this is a wonderful/ ideal time to sell a business. A recession, by contrast, is a more difficult environment in which to sell a business. In a recession, earnings are slumping, lenders are reluctant to make loans etc. making it challenging to get a sale transaction at a strong sales price and on favorable terms consummated.
For any particular business owner it makes sense to sell his or her business when the business owner has gone as far as he or she feels he or she can go with the business. Or when the business owner is forced, typically by external circumstances, to reduce his or her focus on the business and to turn to other priorities. We have assisted/ worked with business owners who felt they had gone as far as they could go with their businesses and that they were not in a position to effectively address upcoming challenges. We have assisted/ worked with many business owners who decided to sell based on their own personal circumstances, probably most commonly health or family related issues.
It also might make sense for any particular business owner to sell his or her business when approached by a prospective buyer who, out of the blue, makes a particularly attractive offer for the business. This can happen when a buyer feels that it needs to acquire a business just like the one in question. It is important to open the door should opportunity knock in this way.
How does one go about selling a business?
We realize that once in a blue moon a prospective buyer shows up at the door of a business with an offer for the purchase of the business that is quite literally too good to pass up. It's wonderful when this happens but this happens but ever so rarely.
Once the business owner decides to sell the business, we generally recommend that the business owner hire a well trained, highly qualified, top rated and highly experienced business intermediary to market and sell the business - a business broker or investment banker.
It is important to hire the right business intermediary for the sale of any particular business. We find it particularly important that the business intermediary hired to sell the business be available to assist with/ work on the project and deeply committed to the project as well. Also, that the business intermediary be familiar with the business to be sold and the market within which it operates.
Yes, business intermediaries cost money, typically charging a fee for the sale that is a function of the purchase price, but we believe that the business intermediary who does his or her job properly will develop more interest in and prospective buyers for the business and ultimately a higher selling price than the business owner could do him or her self. Typically money well spent.