By Dave Godwin CBI STRATEGIC GROWTH ADVISOR
Are you trying to time the sale of your business so that you exit when both your business and the economy are peaking?
While your objective to build your company’s value is admirable, here are five reasons why you may want to sell sooner than you might think:
1. You May Be Throttling Your Business – When you start your business, you have nothing to lose, so you risk it all on your idea. But as you grow, you naturally become more conservative, because your business actually becomes worth something. For many of us, our company is our largest asset, so the idea of losing it on a new growth idea becomes less attractive. We become more conservative and hinder our company’s growth.
2. Money Is Cheap – We find ourselves in a period of ultra-low interest rates. Buyers will likely borrow money to buy your business so—at the risk of over simplifying a lot of MBA math—the less it costs them to borrow, the more they will spend to buy your business.
3. Principle of Supply and Demand – Because of the current financial environment where money is cheap and numerous investors are looking for a place to park their cash, many times sellers will find themselves with multiple offers which result in higher sale prices. This universal principal of supply and demand creates the perfect environment to achieve the maximum dollars for your business.
4. Timing Your Sale Is A Fool’s Errand – The costs of most financial assets are correlated, which is to say that the value of your private business, real estate and a Fortune 500 company’s stock all move in roughly the same direction. Years ago they laid an egg and now they are all booming. The problem is, you’ll have to do something with the money you make from the sale of your company, which means you will likely buy into a new asset class at the same frothy valuation as you are exiting at.
5. There Is No Corporate Ladder – In most occupations, the ambitious must climb the ladder. Aspiring CEOs must methodically move up, stacking one job on the next until they are ready for the top post. They have to put in the time, play the right politics and succeed at each new assignment to be considered for the next rung.
By choosing a career as an entrepreneur, you get to skip the ladder entirely. You can start a business, sell it, take a sabbatical and start another business and nobody will miss you on the ladder. Your second (or third) business is likely to be more successful than your first, so the sooner you sell your existing business, the sooner you get to take a break and then start working on your next. It can be tempting to want to time the sale of your business so that the economy and your company are peeking, but in reality, it may be better to sell sooner rather than later.
Click Here to receive a FREE BUSINESS VALUATION and ONE HOUR CONSULTATION. You will receive a detailed report concerning your readiness to sell, as well as how your business measures up with others in your industry. All information is managed in the strictest of confidentiality.