For many people, the creation of a business is a long-term investment. They eventually want to sell the company. Entrepreneurs and those who may have inherited a family business may have big plans for the proceeds they obtain from a business sale. They may intend to start another company or may use those funds to augment their retirement savings.
Choosing the best time to sell the business and being cautious about prospective buyers are both important for business owners who want to optimize their returns on this type of transaction. When is the right time to list a business for sale?
When the company is succeeding
Many people start thinking about selling a business when the company experiences a downturn in revenue. Unfortunately, that approach may result in lowball offers and the seller with very little negotiating power. The best time to sell a business is often when it has been profitable recently and has good prospects for future revenue generation. When the last few quarters have seen reasonable profits, that may be an indicator that the owner could sell the business at a competitive price.
When a buyer makes an offer
Occasionally, a business owner may not have had any concrete plans to sell a business when they receive an offer. Someone who recently moved to the area might want to purchase a business in an industry with which they are familiar. Established local businesses looking to expand their market share or gain access to talent may want to make offers for the purchase of existing businesses. Provided that the offer is appropriate and that it does not include any terms that create liability for the current owner, selling in response to an unexpected offer, possibly after negotiating, can be a savvy business decision.
When the owner needs to make a change
There are many reasons why a business owner might choose to step away from an otherwise successful company. Major life changes, health issues or impending retirement can also be reasons to start preparing to sell a business. Ideally, people should begin preparing to sell a business as early as the day they start the company. That way, they can evaluate each offer and optimize the circumstances of the company to attract more interested buyers.
Having support while preparing to sell a business or when reviewing offers is of the utmost importance. Business sale contracts are complex, making a thorough review of the paperwork important for the protection of the owner.