Selling Your Business Is All About Timing
While you may be eager to sell your business immediately, be aware that careful planning and timing can have a positive impact on your sale price. Observing market conditions, preparing your business for would-be buyers and strategically positioning it as a viable enterprise will all play an important role in the timing of when you decide to sell. Below are a few guidelines to help you properly time the sale of your business.
Prepare In Advance
It pays to prepare your business for sale well in advance before you actually put it on the market, both in terms of stress-reduction and potential income. You can work at your own pace in getting your financial records in order and then have the documents ready for prospective buyers before you place your first business-for-sale ad. Plan to allow at least six months to a year to prepare your business for sale. Diligent preparation, like having at least three years of financial records available for potential buyers to examine, will help you to show your business in the best light. Not only will you want time to gather all the necessary documentation that potential buyers will expect to see, you’ll also want to have the time to improve your company’s position in the market, giving it more “curb appeal”.
Also, keep in mind the time frame it takes to complete a business sale. Most sales take 6-12 months from the time they are placed on the market to close. Careful preparation will give you more flexibility to align your sales timing with a favorable market and could help you avoid the pitfall of having to sell quickly at a less-than-ideal price.
Research the Market
In order to establish a fair asking price, you’ll need to do some research to objectively determine where your business fits into the market. While you certainly don’t want to underprice your business, pricing your business too high may drag out the sales process or even prevent your business from selling at all. Fluctuations in the market, and more specifically within your particular industry, will help you determine the best time to put your business on the market. Look for similar businesses for sale to get a feel for the current market and then seek the help of a professional. An appraiser or business broker can help you hone in on a realistic asking price. BizBuySell Valuation Reports are another great starting point (beef up).
Define Your Business’s Value
Try to take a fresh look at your business through a potential buyer’s eyes in order to determine your business’s strengths and weaknesses. Next, take the time to promote its highpoints and work on its low points with an eye towards improving your selling price. Remember that buyers would ideally like to purchase a business when it’s doing well and showing steady growth. If records show your sales in decline, then it may not be the best time to sell, since this will negatively impact your selling price.
You want your business to stand out in a competitive market as the best investment in its field. This is another area in which a business broker’s knowledge and input may prove invaluable. Your documentation should include past results and current placement in the market, as well as the potential for future growth. Potential buyers will not only want to see a record of good bookkeeping, but will also want to know about current employees and your customer base. Positive feedback from your employees and customers will go a long way in ensuring a smooth transition for potential buyers.
In addition, a strong marketing presence is a good indicator to potential buyers that your business is a sound financial investment for them. If you haven’t established an easily identifiable online presence and user-friendly website, consider this a part of your seller’s preparation. Your website is likely to be the first impression that potential buyers will have of your business.
Remember, a strengthening economy is just one of the indicators of a prime selling time. Fluctuations within your industry and your business’ current position within the market also play roles in determining when your sale will be most profitable. You want all of those complex pieces of the puzzle to align to bring you the best market value for your business. It’s possible that the time you take to improve your business may also produce favorable shifts in the economy rewarding you for your hard work and patience.