6 minute read

How Urgently Do You Need to Sell? The Secret Bargaining Chip When Exiting Your Company

As a business owner, the decision to sell your venture isn't just a question of 'if,' but rather a nuanced consideration of 'when' and, more importantly, 'how urgently.' Understanding your level of urgency is not just about timing—it’s a strategic part of the selling process.

Let’s explore how it can significantly impact your leverage.

A Critical Starting Point

At the heart of every transaction lies the fundamental question:

Do you want to sell, or do you need to sell?

This isn't just semantics. It's the cornerstone of your negotiation power. The less urgency you have, the more leverage you have. With less urgency, you can afford to play the long game—perfecting your business, declining or countering sub-optimal offers, raising your EBITDA (which increases your multiple), and ultimately attracting buyers willing to pay top dollar for the privilege of taking over your success story.

Having this flexible grace period allows you to fine-tune operations, strengthen customer relationships, and, most importantly, increase profits, which can lead to a better sale price and terms.

If you're not in a rush to sell, you're holding better cards. You have the advantage of being able to implement growth initiatives, and not just increasing numbers; you're enhancing your business's narrative to a prospective buyer. And with a better narrative comes the power to command a higher multiple, lining your pockets with significantly more from the sale.

Push vs. Pull: The Dynamics of Selling

Now is the time to reflect deeply on why you are selling.

Business exits are usually propelled by two forces: the 'push' and the 'pull'.

Push factors, like operational burnout, are what drive you away from your business. Pull factors, such as the draw of a new venture that you're itching to pour your heart into, are what pull you toward a new opportunity.

These forces aren't just emotional; they're economic signals you can't afford to ignore. When operational fatigue sets in, it can erode your business's value. Buyers can sense when an owner is at their wits' end and may capitalize on this, potentially undercutting your company’s worth.

But pull factors add a different type of pressure: the loss aversion of what you're missing out on. Is there a side project capturing your entrepreneurial passion? Is family a place that needs your attention?

Take some time to answer these questions for yourself. This reflection is crucial because it shapes your positioning to potential buyers. It gives insight into the timeline you're working with, and it helps you understand what you might be willing to compromise on—or not.

Opportunity Cost: The Hidden Driver in Your Decision

Let's talk about the elephant in the room: opportunity cost.

It’s the shadow lurking behind every decision, the "what if" whispering in your ear. In the context of selling your business, opportunity cost plays a key role.

It's about quantifying the unseen, calculating the financial implications of untapped potential against the profits of present operations. If your heart and mind are being pulled towards new horizons, every moment spent tied to your current business is a moment not invested elsewhere.

For instance, perhaps there's a side project that's been growing more and more exciting, but your current business commitments are the shackles keeping you from diving deeper. Or, maybe you're planning to have kids and want to invest your energy there before diving into a different venture. These aren't just lifestyle choices; they're strategic decisions that can significantly impact the urgency to sell.

The reality is that opportunity costs can, and often do, affect the sale price. If time is a luxury you don't have, you may need to be more flexible with your terms or asking price. This doesn’t mean you’re at a disadvantage—it means you need to be clear, focused, and strategic about your exit approach. You also need to be mindful of how you present this in conversations with potential buyers.

In this scenario, urgency sneaks up on you. It may not be a dire need to sell that's driving you, but rather a compelling desire to engage in new ventures or life experiences. This can dictate the pace at which you enter the market to sell your business.

Crafting Your Exit: The Strategic Approach

As a business owner, you need to plan your exit strategy with an accurate understanding of your personal urgency. This allows you to step into the sales process with clarity, ready to negotiate from a position of strength, not desperation.

So take this moment to reflect on your current situation. If the timeline for selling now is possible but not pressing, use it to build value and command a higher price.

If push factors are at play, recognize them early and take proactive steps to position your business attractively for sale before it sits on the market and you risk a lowball offer.

And if pull factors are influencing your urgency, consider the trade-offs. What could your business be worth a year from now with the right focus and investment? Is this potential gain worth the opportunities you're foregoing?

Conclusion: Harness Your Urgency to Your Benefit

To all the business owners grappling with the question of when to sell, remember that urgency is a spectrum. It's a delicate balance between your current company’s performance and potential versus the presence of future endeavors. As you mull this over, remember that your level of urgency is a powerful tool. Use it wisely, and it will serve you the highest walkaway possible.

As business owners we have to acknowledge that timing is outside our full control. Understanding your urgency to sell can offer you a powerful position from which to negotiate. Remember, this isn't a countdown to offload your life's work—it's a strategic element that, when leveraged correctly, can ensure you exit on your terms, with rewards that reflect the true value of everything you've built.

For many founders considering selling on the horizon, a broker or intermediary/advisor can help with the best go-to-market strategy based on your urgency and negotiate with buyers on your behalf. Visit the BizBuySell Broker Directory to find a broker in your area to help you plan your exit. 

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