There is plenty of information out there giving you some great reasons as to why a business owner might put their business on the market and sell. But I would like to highlight a few points as to why selling your business right now might not be the best move for you.
Tired & Run Down
Quite often we see business owner selling up due to the fact that they have simply had enough and are ‘burned out’. They have been running on fumes for a while now and feel as this have are stuck in a rut. This is usually the time when the owner decides to sell, which is for all of the wrong reasons!
If you fall into this category, it is safe to say that you have most likely been running your day to day activities on ‘auto pilot’, barely making through each day, stuck in the monotonous cycle.
It is also safe to assume that you have not been putting in 100% effort and as a result, your business is not performing at its peak, or at least to the best of its ability in the current market.
If this is the case and you advertise your business for sale at this time, you will most likely not get a lot of interested buyers as they will see poor and declining sales figures. You would also not fetch the best price for your business.
Restructured, New Services and New Products
If you have recently made some major, or minor changes to your business, selling your business before you have had time to let the recent changes settle in would be a big mistake.
The potential buyer would need to see that the investment, time and effort which you have dedicated in these changes has paid off.
Some of these changes may be:
- Redesigned website;
- New product range;
- New services;
- Renovations;
- Pricing restructure.
Being able to provide evidence for a positive effect to the bottom line directly after making some changes to your business would ensure a better return for yourself. Be patient, let the dust settle on your recent changes and then make a decision on selling.
Business is Booming……Just!
If you have been working your behind of for years building and growing your business from the ground up, putting in countless hours to provide the best service possible for your customers, you are not alone. This is what it takes to be successful in business and at some point, you will start to reap the rewards financially.
If from one month to the next, you see a 100% increase in sales, this is something to get excited about, but it is not the time to cash out!
As your sales boom, so does the value of your business and any potential buyer will like to see at least 1-2 years previous sales history.
When it comes to pricing your business or putting an asking price on it, it will usually be 1.5 to 3 times annual profits. And if you want to get the highest price possible, you would not sell directly after having your best month (financially), but would hang on to it for at least another 6 – 12 months and continue growing your business.
Doing this could see your business’s value double, triple or even quadruple!
Not Making a Profit
Selling a business because it is not making a profit doesn’t always make sense. Obviously selling a business in this position will fetch a poor sale price. Most likely the value of your stock, tools and assets only. You will not be compensated for the endless hours you devoted and dedicated to this business.
Sometimes the fact that your business isn’t making a profit doesn’t mean that it won’t. You need to take all aspects of your situation into account and arrow down the reason why your business is struggling. Get some professional advice and get your business back on track.
Analyze your competition and see what they are doing and implement similar techniques.
Perseverance could see your business come out the other side making a profit and it is at this time that you would want to sell. Bigger profits means bigger asking price and a bigger sale price when selling your business.
All of the points mentioned above may or may not be applicable to your business’s current situation, but please be familiar with them before rushing placing your business on the market.