We can be brief about that. The best time to sell your business is when you and your business are both ready. Sound like a dead giveaway? We are happy to explain.
An entrepreneur does not think easily about selling his/her business. It is a big step to hand over the reins (partially). You have become an entrepreneur out of a passion and a goal. Yet there are plenty of reasons to sell (part of) your business. Think of:
- Other interests;
- An age where you are looking for business succession;
- The business needs additional investment to develop further;
- The business needs another entrepreneur for the next phase;
- The market dictates a direction in which the business is better incorporated into a larger or different entity.
At what point do you start selling your business?
Actually as soon as hints of the aforementioned situations arise, an entrepreneur should start preparing the business for sale. Getting ready to sell consists of a number of stages:
a. Putting the business in order.
The company's administration is in tiptop order. The financial statements have been prepared and signed. The bodies in the closet are known.
The company and the entrepreneur are no longer (100%) dependent on each other. The enterprise can continue in whole or in part without the entrepreneur. This allows the new owner to continue the enterprise without too many problems.
b. Legal structure
The legal structure of the company is clear, uncluttered, and there are a limited number of shareholders. Some SME businesses are ramified with many bv's, vof's and/or several shareholders with different shareholder agreements at different levels. Buyers do not want to negotiate with many parties. In fact, this makes the process cluttered, time-consuming, costly and risky.
c. Business plan
The selling entrepreneur has a good business plan ready, not 2 A4s with "some numbers. A well thought out and prepared business plan can attract the right buyer and ensure better transaction results. This business plan is the basis for the information memorandum that will be used in the process of selling.
The business plan also gives a good idea of the value of your business.
d. Preconditions
Other important preconditions have been completed. The entrepreneur has been in contact with several advisers and has gathered a good team around him or her for support. A good team gives peace of mind and ensures lower risks and higher returns.
Start on time. In order to have the previous conditions properly completed, it is important to start on time. Actually when you are not quite ready.
Is the business cycle or market also a determining factor?
Sell a business can involve a lot of money. So selling during periods of low interest rates, a growth market, willingness to invest and boom times can ensure better results. Such as more interested parties, more choice, a higher sales value or better terms. But market conditions depend on the type of business you are selling, so the above may not always be true.
The best time
Good preparation is half the battle as well as doubling the proceeds. When you have prepared the sale well, then the value of the business is visible and not only the risks. With good preparation, you choose the right buyer(s) and realize the best deal. Hence the conclusion: the best time to sell is when you and your business are ready.
