flevyblog

Flevy Blog is an online business magazine covering Business Strategies, Business Theories, & Business Stories.
MANAGEMENT & LEADERSHIP STRATEGY, MARKETING, SALES OPERATIONS & SUPPLY CHAIN ORGANIZATION & CHANGE IT/MIS Other

How Can Business Owners Assess the Market and Determine if It’s a Good Time to Sell?

Editor's Note: Take a look at our featured best practice, M&A Sell-Side Process Letter - Phase I and Phase II (5-page Word document). What is the M&A process letter? The M&A process letter is a template or example which assists transaction advisory consultants, investment bankers, and M&A practitioners with a sound basis from which to outline the proposed transaction steps in an M&A process. As the M&A process progresses [read more]

Also, if you are interested in becoming an expert on Post-merger Integration (PMI), take a look at Flevy's Post-merger Integration (PMI) Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

* * * *

Selling a business can be challenging. After all, you have likely worked many years to get it where it is today. Consider all the times you skipped vacation to meet customer demand or the sacrifices you made to keep it running.

However, now that you are thinking about selling your business, it’s vital to understand if this is the right time. You must consider numerous factors, including market conditions. There is a right and wrong time to sell your company, so you should ensure there is a demand for it before putting forth the effort.

Here’s what to consider when determining the right time to sell a business and make the most profit.

1. Check the Economic Conditions for Selling a Business

The economy is a significant factor to consider when selling a business. Determine if the economy provides the right conditions by checking the national GDP growth rate, employment rates and inflation. A strong and growing market means potential buyers may be willing to make a substantial investment.

Interest rates are a key indicator. Low rates typically encourage borrowing, which can benefit buyers seeking financial options. On the other hand, a recession or economic downturn may make it challenging to find willing buyers or get a desirable price. Most prefer to sell in a favorable environment to benefit their bottom line.

2. Assess Your Business’s Worth

Determining your business’s value is crucial because a well-evaluated company gives you the upper hand in the sales process. Begin valuation by reviewing your financial statements, focusing on your assets, liabilities, revenue and profit margins.

A professional business valuator may be appropriate for this step because they can provide an in-depth assessment of your company. They will use various valuation techniques to give you an accurate figure.

They will look at things like the market and the profits you are receiving. Appraising your business will help you understand its worth. If it is on the lower end, take steps to increase it so you are more likely to get a good price.

Either way, knowing the value of your business allows you to sell it for what it’s worth and potentially make a higher profit.

3. Look for a Demand of Potential Buyers

Another important factor to consider is whether any buyers would purchase your business. A high demand shows a market for sellers, which would be good news since you create better terms and gain more competitive offers.

Determine if there are potential buyers by understanding who they may be. They could be another competitor in your industry, someone new entering the market or a company seeking strategic acquisitions. Investors come in all shapes and sizes, and greater demand brings better offers.

You can find this information by leveraging industry networks and business brokers. Using these resources to your advantage lets you gain a sense of the buying interest in your sector to determine the right price to set for your venture.

4. Consider Industry Trends

Trends in your industry greatly influence how attractive and valuable your business becomes. That is why you should stay informed about where the sector is heading. Is it on an upward trajectory where it is growing and attracting investors?

Businesses in these industries are often seen as more valuable to potential buyers because they know they can profit if they obtain your company. A declining sector may force you to adjust your valuation expectations.

Consider what changes are happening within your industry. Are there any technological advancements or shifts in consumer behavior? Your business can attract more buyers if the sector is brimming with innovation and undergoing a positive change. Investors want to be on the cutting edge to capitalize on forward momentum.

Therefore, it is essential to sell if your industry is gaining momentum. A peak period is the right time to maximize your business’s value and receive more offers and higher prices.

5. Are You Emotionally and Financially Ready to Sell?

Deciding to sell a company is more than a financial decision — it is also personal. Business owners often invest years of hard work, passion and dedication, so the selling process can be emotional.

Ask yourself why you want to sell. Try to look at it objectively and determine whether selling your business will put you in a better place. Would allowing someone to take it off your hands make you happy? Are you struggling to manage and grow it?

Some business owners find it too challenging to run a company, but there are ways to fix the issue. Discussing these feelings with a mentor or peer is important to help you gain clarity.

Once you’ve determined why, the next step is understanding whether you’re ready to sell it financially. Will the sale meet your financial goals? Consider your post-sale plans. Will the money be enough to retire, start a new venture or something else? An adviser can help you understand the implications of the sale on your personal wealth and long-term planning.

Determine the Best Time for Selling a Business

In entrepreneurship, determining the right time for selling a business is as crucial as the decision to start it. Be sure to ask yourself if it’s a good time to sell and weigh the pros and cons. Think about the market and your personal aspirations before moving forward. Each aspect intersects with one another, helping you gain insight into your next move so you can proceed with confidence.

24-slide PowerPoint presentation
Seventy percent of change programs fail, according to the April 2001 Harvard Business Review article, "Cracking the Code of Change". According to Bain & Company, businesses that implement fast, focused, and simultaneous change programs can create enormous and long-lasting shareholder [read more]

Want to Achieve Excellence in Post-merger Integration (PMI)?

Gain the knowledge and develop the expertise to become an expert in Post-merger Integration (PMI). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. Click here for full details.

M&A is an extremely common strategy for growth. M&A transactions always look great on paper. This is why the buyer typically pays a 10-35% premium over the of the target company's market value.

However, when it comes time for the Post-merger Integration (PMI), are we really able to capture the expected value? Studies show only 20% of organizations capture projected revenue synergies and only 40% capture cost synergies. Not to mention, the PMI process is typically very painful, drawn out, and politically charged, often resulting in the loss of key personnel.

Learn about our Post-merger Integration (PMI) Best Practice Frameworks here.

Readers of This Article Are Interested in These Resources


163-slide PowerPoint presentation
Unlock M&A Success with the Comprehensive Due Diligence Checklist Toolkit Are you ready to embark on an exciting journey into the world of mergers and acquisitions (M&A)? The M&A landscape is both dynamic and rewarding, offering opportunities for businesses to expand their [read more]


 
32-slide PowerPoint presentation
 
 
4-page Word document

About Eleanor Hecks

Eleanor Hecks is the editor-in-chief of Designerly Magazine. She’s also a web design consultant with a focus on customer experience and UI. She lives in Philadelphia with her husband and pups, Bear and Lucy. Connect with her about marketing, design and/or tea on LinkedIn.




Complimentary Business Training Guides


Many companies develop robust strategies, but struggle with operationalizing their strategies into implementable steps. This presentation from flevy introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. [Learn more]

  This 48-page whitepaper, authored by consultancy Envisioning, provides the frameworks, tools, and insights needed to manage serious Change—under the backdrop of the business lifecycle. These lifecycle stages are each marked by distinct attributes, challenges, and behaviors. [Learn more]

We've developed a very comprehensive collection of Strategy & Transformation PowerPoint templates for you to use in your own business presentations, spanning topics from Growth Strategy to Brand Development to Innovation to Customer Experience to Strategic Management. [Learn more]

  We have compiled a collection of 10 Lean Six Sigma templates (Excel) and Operational Excellence guides (PowerPoint) by a multitude of LSS experts. These tools cover topics including 8 Disciplines (8D), 5 Why's, 7 Wastes, Value Stream Mapping (VSM), and DMAIC. [Learn more]
Recent Articles by Corporate Function

  

  

  

  

  


The Flevy Business Blog (https://flevy.com/blog) is a leading source of information on business strategies, business theories, and business stories. Most of our articles are authored by management consultants and industry executives with over 20 years of experience.

Flevy (https://flevy.com) is the marketplace for business best practices, such as management frameworks, presentation templates, and financial models. Our best practice documents are of the same caliber as those produced by top-tier consulting firms (like McKinsey, Bain, Accenture, BCG, and Deloitte) and used by Fortune 100 organizations. Learn more about Flevy here.


Connect with Flevy:

     
  


About Flevy.com   /   Terms   /   Privacy Policy
© . Flevy LLC. All Rights Reserved.