When is the Right Time to Sell Your Business?

By Generational Equity

01/14/2020

The title of this piece is a question we are regularly asked by business owners attending our exit planning conferences. And although the decision to begin your exit journey is unique to you and where you are in your life cycle, one thing is true across the board: The right time to sell your business is when the market tells you to!

You may ask, what does that mean exactly?

Essentially, not factoring in where you are in your personal life (age, income needs, and professional challenges), the time to sell is when buyers are active. The more active the better. And, as we have said before, right now is a great time to sell your business. In fact, according to our friends with Axial:

Middle market deal activity in the first half of 2019 was on pace with 2018’s record-setting figures in respect to both deal count and value. In Q2 2019, buyout shops closed 866 deals for a total of $124.2 billion, representing a year over year increase of 12.9 percent and 15.8 percent, respectively, according to Pitchbook Data.

This is great news for business owners that have begun the exit process. And even greater news if you are an owner of a middle market company. Also from Axial:

The middle market continues to dominate the private equity sector. Middle market private equity deal activity comprised 82.4 percent of all buyouts in the U.S., marking five consecutive years. The middle market also made up 69.2 percent of private equity deal value in the first half, higher than any full year figure since 2014, according to Pitchbook. Add-on acquisitions remain popular among middle market private equity firms looking to add value. In the first half of 2019, add-ons made up 59.5 percent of deal value as well as 68.8 percent of deals closed in the middle market.

So, what’s the answer to the question of when is the right time to sell your business? Right now!

Of course there are some key caveats to that statement, the biggest being: Do you have a buyer ready business? The really interesting thing is that even when the economy is in decline and buyers are less active, they will still pay a premium to invest in a well-run, profitable, growing business.

What concerns buyers the most is risk. Quite simply the higher the risk associated with your company, the lower the value they will place on your business (unless you have a solid list of intangible assets that set your business apart from others). 

The best way to learn about how to build a buyer ready business is to attend a Generational Equity exit planning conference. These complimentary meetings are designed to enable you to begin to engage with how to manage your exit journey. The information you will gain and take with you is invaluable. Here is a list of some of the topics covered at our meetings:

• Building value vs. growing a business
• Value myths exposed – the truth about multiples, book values and more
• How savvy buyers take advantage of unprepared sellers
• Interest rates and their impact on selling price
• Exit strategy and timing
• Presenting your financials properly
• Seeing your business through the eyes of the buyer
• Explaining your company's past; documenting its future potential
• Creating your “document of value”
• 16 steps to take you from the start of the selling process to a successful close
• Common and costly pitfalls to avoid
• Increasing your total purchase price through stock, royalties, license fees and consulting fees
• Making your business "pay you" even after you exit
• Important legal and tax considerations
• Protecting your lifestyle and estate needs

And much, much more! Folks who attend our conferences nearly unanimously tell us that it is the most valuable business conference they have ever attended. To learn more about attending a conference near you, please call us at 972-232-1121 or provide us with your contact information and we will be in touch.

And hopefully we have answered the question: When is the Right Time to Sell Your Business?

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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