Not all businesses can work the way you want! But then again, not every venture in your life can be a success. The key to preventing large-scale disappointment is to make the most of adverse situations. A business may crash due to various reasons, starting from financial crunches to the lack of proper administration. Selling your business at the right time can help mend the situation to a great extent. If you can sell your business before a crash, you will be able to recoup the losses and start again, if possible. But it can be tricky to know the right time to sell your company. Sometimes, a temporary down period can be easily overcome, while in other times, you may not even prevent a sudden crash, if you do not identify the red flags on time.
In this post, we are going to discuss this issue, as well as provide you with effective suggestions to identify the best time to sell your business and move ahead. But before that, you need to know a few things related to this.
Selling Your Business Is Not Equivalent To Failure
According to experts, less than 5% of business owners even think about the selling part while starting up. They consider it to be a last-minute decision, if the business does not do as well as expected. It is not the right way. You should keep a plan in place, when you begin, so that there is no delay in taking such decisions. Be comfortable while speaking about selling the company, so that you may gain the capital and do something better. It is not equivalent to failure, as many business owners may think.
Yes, for family businesses, it can be a difficult decision, as legacy longevity comes into question. They may want the business to grow and then their children and grandchildren to feed off it. As a result, any discussions or conversations about selling can take a backseat. However, what these people do not think about is, sometimes, selling a poorly-structured business can provide them with the capital that they may invest in something better, more competitive, and upgraded. Selling an old business that is doing well in the market can allow them to try something newer with a greater potential to capture the market.
Hence, business owners should not think about selling as their last option. On the contrary, they can think about selling when the business is at its peak so that they can get maximum value for it.
Think About Selling Before You Sell
As mentioned just above, you should have a selling plan ready before you even decide to sell your business. It is best to seek the help of a professional accountant or financial advisor to know where your business stands at any point in time. You can go for a yearly analysis to decide on the best time to sell your company. Unlike most business owners, who decide to sell their business when it is tanking or they do not have any passion left to run the company, you need to sell your business when it is somewhat at its peak. Try to start a selling conversation 24-36 months in advance, so that when the time comes, you can sell it off without difficulty.
Why Should You Consider Selling Your Business?
You may ask, why sell at all? If you have long-term plans for your business, you may not want to think about the selling part. However, there are certain situations when selling your business may be the best option you have. For example, you may be facing financial issues or lose the passion to do business altogether. Then there may also be personal situations, where you are unable to give enough time to your family because of the business. Selling a business need not only be a result of downtimes or problems in the market. It may be going pretty well but still invite problems in your personal or family life. For example, you are so engrossed in growing the business that you fail to spend time with your family or kids. Further, you may not even be making too much money from the business and cling to it only because of your passion. Well, in such times, selling it for a larger capital can actually help you.
In the case of financial and performance issues, failing to decide to let go at the right time may cause you to sink along with the business. Then there are situations when nothing is going according to the expectations of the business owner. The business may be tanking, as the owner may also not be in a situation to fight for it. He must really feel like letting go. You need to prepare your business for such adverse situations that do not follow any pattern. Therefore, selling should be in your mind always, not as a way to get out of your business but to make the most of critical situations and come out a winner.
Take the COVID situation as an example, many business owners failed to ride out the storm and ended up losing their businesses. Some others lost their passion to run the business. Very few of them have had a financial plan in place to get the most out of the situation. If they had, things would not have been this bad. That is the reason why financial planning should be on every businessperson’s priority discussion list. One should consider situations when the entire market crashes and create plans accordingly to help keep the business afloat or close it on time and move on. Professional advice is indispensable in such matters.
Disputes In The Family
This is another instance when family businesses face critical times. The owner may have built the business for the next generations, but what if they do not want it? There may arise disputes in the family, when some members want to sell the business off, take their shares and start something of their own. Others may wish to carry on. You may end up selling the company to settle the dispute even if it may not even be on your mind. So, why not stay prepared in advance for such unfavorable conditions? It does not take much to seek the help of a professional financial advisor and keep a plan up your sleeve.
Retirement And Other Things
So, you have built a business and grown it with your sweat and blood, but now, no one in your family is interested in taking it over. What do you do then? You sell it, of course! But, what about the value of your business? You can never know the right value of a business, as it can change from time to time, depending on the way it’s run and the market.
There can always be an investor, who may run your business better and earn more profits than you ever did. Why not make the most of that opportunity then? With an open mind, a futuristic vision, and a proper plan, you can always be on the gaining side, when it comes to selling your business. It is best to have a number in your head for selling, irrespective of the condition of the business. You can vouch for that number when it is time to sell. To prevent understating or overstating that number, you can take the help of a chartered business valuator, who will be aware of the potential of your business in terms of ROI and other benefits.
What To Do With The Money After Selling Your Business
Early retirement may not be everyone’s cup of tea. Especially the go-getter. Well, they can. And they can use that money to build something new. They can start a social campaign, or be a philanthropist, whatever they wish. The need for another plan of ‘what to do after’ comes into play here, and one must think of it in advance as well. The owner should not go into depression after selling the business as he did not have a plan ready. Sometimes, it is this fear of the unknown that prevents business owners from selling their company, even if it is the right time. The professional advisors can help here. When you are discussing your selling plan with them, make sure that you start a conversation about what to do after.
If you have a family business, you should also discuss this with other members, who may have contributed to the business or invested shares in it. Such preplanning will prevent questions like, “Why wasn’t I involved in this?” or “Why didn’t you consider my suggestion?” Having a talk with the key members in the company or family, people who might have a say in it, will also help in the decision. It is recommended to keep an open channel of communication always, so that everyone gets to speak their mind regarding the future.
A business is not just about numbers but many things beyond that. One should consider the emotional aspects as well, especially in the case of family businesses. Open discussions with your family members, partners, and shareholders before you take the crucial decision. It will increase your chances of getting their support in your future endeavors. Also, do not forget to keep your professional advisors in the loop, as there is nothing worse than carrying out a plan with no research or analysis to back it.