Choosing the right time to sell a business – It’s personal!

Choosing the right time to sell a business – It’s personal!

Our recent survey of business owners showed that 30% of business owners were concerned about choosing the right time to sell their companies. It’s a valid concern and it’s important to get the timing right, not only because it can impact on value but it also brings into question the motivations for sale – both personal and business.

In fact personal issues should really be the starting point. After all, it’s a decision that will have a massive impact your personal life.

Sometimes an owner has no choice and must sell whether or not the timing is right but assuming this isn’t the case let’s examine the personal issues surrounding a business sale.

Personal Motivation

I’ve written and presented on the issue of personal motivation many times, urging business owners to think about this next phase of their lives and to plan for it.

Motivations for a sale can be many and varied but typically include retirement, health problems, desire to realise the investment in the business, desire to start a new venture or just because the owner simply doesn’t enjoy running a business anymore.

But it’s also a time to consider whether you’re still as much of an asset to your business as you were at the outset. It can be hard to accept that you may not have the skills the business needs going forward, but the best entrepreneurs are able to recognize and accept this. Of course you don’t need to sell the business in order to address this issue but it’s a consideration that will affect your personal and business decisions at some stage.

Although the motivation may be personal, unless you have alternative income sources, financial motivation is intrinsically linked. Calculate the sum of money you need to realise from the business sale, taking into account family and health needs as well as the cost of achieving your “wish list”. I call this the “Magic Number” and being able to realise that number from the business sale will determine whether you sell or not.

If it turns out that a business sale is unlikely to deliver your magic number you will be able to consider what needs to change in your business, how much it will cost and how long it will take before you will be in a position to sell with confidence.

Emotional readiness

Having made the decision to sell, at some point a business owner is faced with the emotional reality of severing the bond with the business. This is much stronger than many people realise, encompassing issues of personal identity, lifestyle choices, family relationships and financial security.

After determining that there is a compelling reason to sell and being reasonably confident that their objectives can be realised, a business owner needs to take some time to prepare themselves emotionally. At some stage in the sale process, he or she will have to face the emotional reality of severing the ownership bond with the business and that bond can be hard to break.

Being ready to take the step into a new life chapter is critically important. Business owners are natural entrepreneurs and that tends to define us and become part of our self-image. It provides a sense of identity, self-worth and control, particularly to owners who have been running their businesses for a long time.
It’s vital to come to terms with these issues before putting the business up for sale. Why? Because selling a business is an intense process and when it comes to negotiations with prospective buyers you will need to focus fully on the proposed deal and not be distracted by personal and emotional issues. In my experience the majority of deals fail because the seller pulls out and that is both time consuming and expensive for both parties.

In summary

Business owners are resourceful, resilient people – they have to be! So applying those qualities to the question of exit timing won’t be too much of a challenge, provided that sufficient time is allocated.

If you are emotionally prepared to sell up and have a clear vision of your life after sale then you can move on to the business considerations. If you’re not at that stage yet, then you will have the opportunity to prepare yourself and to create an alternative exit strategy, perhaps to focus on building your business and increasing its exit value. By the way, growth to exit strategies are powerful things and will almost certainly change some elements of your business plans.
Whatever decision you arrive at, it’s a truly valuable exercise to consider your personal motivations and one which will ultimately help you to realise your goals.
If you would like to learn more about preparing to sell a business you’ll find podcasts, videos and articles online at www.evolutioncbs.co.uk/resources.

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