Many entrepreneurs have selling in the back of their minds, however, owners who are thinking about selling their business don't always do so out of financial desperation or trouble.
It could be for a number of reasons...
These include retirement, illness, relocation or simply wanting a change of direction. But it is always important to take stock and reflect on whether it is the right time to sell the business. This applies even more if there are factors such as illness or rapidly changing circumstances involved.
While some business owners tend to go with their instincts and general feelings, others tend to take a more systematic and methodical approach. Some business owners take matters into their own hands and take active steps to market the business, while others may take a more passive approach and wait to be approached by potential buyers.
It’s worth considering the different ways that businesses come on to the market and how you can ready your business for sale and maximise the value.
Reasons for selling a business
It might be the right time to sell if you have a strong motivating reason, if the sale will provide you with valuable cash needed for future projects, and if you are prepared for the emotional consequences of the sale. If all three of these criteria cannot be met, you may want to reconsider the idea of selling. You may not have a strong reason for selling.
Or perhaps the business is going through a rocky patch but may recover in the near future, by which time you can be more assured of a more comfortable retirement. You may still be psychologically attached to the business, in which case your initial reason for selling may not be strong enough.
Motivating reasons for selling
Selling may be because of personal motivations, such as differences of opinion with co-owners, unwillingness to relocate if necessary, family problems, health issues, or simply wanting to embark on a different project.
Other reasons for selling are more economic in nature, for example, the owner may want to raise capital, reduce their level of personal financial risk associated with business ownership, or the business may simply not be giving high enough returns to meet the owner’s requirements.
The stage that a business is at may affect whether it is an attractive prospect for buyers. New or early growth businesses can be difficult to value and are more of an unknown proposition for buyers. Businesses undergoing growth and development are generally very attractive to buyers interested in investing the necessary time and resources and can achieve a good valuation.
More established businesses can also be attractive to buyers wanting to inject new growth and opportunities. Businesses seeing a decline in sales will attract fewer buyers, but may be bought by those with the capital and know-how to turn things around.
Future projects and objectives
When considering selling a business, you should ask yourself if the sale and minimum price required are achievable at the present time. To this end, factors such as marketing, realistic valuation and environmental conditions should be considered. While marketing is necessary to attract and maintain the interest of buyers, underpricing may not give the owner the necessary funds and overpricing can put buyers off.
Environmental conditions, including internal conditions such as sales and employee stability, and external conditions such as the economy, competitors and legislation, may affect whether it is the right time to sell.
Psychological considerations in selling
Psychological factors when selling a business can involve identity and lifestyle influences, family considerations and financial considerations. These should all be considered prior to placing the business on the market.
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