Should I wait to sell my business until it’s at a high point?
As a business owner looking to sell a business, you may find yourself mulling over the timing of the sale and questioning whether to wait until the business hits the peak of profitability to list it on the market. There are factors that you can take into consideration to help you decide on the best time to sell your business, such as upcoming operational changes, industry competition and economic shifts.
It's common for business owners to grow a business to the height of success, to then seek a buyer with a similar skill set and professional track record to take over ownership. A profitable business is likely to be valued at a higher price, but for this value to hold, profitability must be sustained.
It’s worth noting that profitability is not the only benchmark a business can measure itself up against. The business may have targets that it wishes to achieve within a set timeframe, such as a set number of sales, forecasted investment returns or a desired employee structure. The meaning of success and high points differ for each business, although profitability and turnover are the key contenders.
The Selling My Business team assess the prime time to sell a business and whether it’s best to sell a business when it’s in a position of strength.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
When’s the prime time to sell a business?
Many factors determine business success, but to measure this accurately, you must actively track the growth of your business. It’s fair to say that each financial year is different, so although the growth of a business may be on an upward trajectory one year, this could flip the following year.
While there are universal factors that may influence the performance of a business, such as economic uncertainty, there are also challenges specific to sectors that could shape how well, or worse off a business performs, such as:
- An emerging competitor curbs turnover
- Upcoming legislative changes mean that you'll be taxed more and therefore, take home less money
- Rising material prices mean that overheads will increase, and performance will take a hit as a result. Material shortages and unprecedented demand could feed into this
- Changes to sector regulations could mean an overhaul of company operations which could impact efficiency
Your timeline for selling your business may be determined by these factors, as you may choose to sell ahead of any upcoming changes, or during them.
Why sell a business that is doing well?
Business owners may choose to sell a business that is doing well as the more money a business can generate, the more money buyers will be willing to pay. While some business owners may decide to reap the rewards of a growing business, some may choose to sell up and seize the opportunity to sell the business at a higher price. Passing the business to a new owner during this opportune time will mean that they can also benefit from the success of the business.
Buyers are always on the lookout for a business with high potential and promising prospects, so being able to satisfy this can result in substantial returns.
Should I wait until my business is at its most profitable to sell?
The answer to this question is individual for each business owner, although a high performing business with much in the way of prospects can prove to be greatly popular. This may also ease the process of finding a buyer as a business with outstanding financials is likely to gain more traction than a business with a limited financial track record.
For more information on how to decide on the best time to sell a business, get in touch with a member of the Selling My Business team.