Lately, this has become a very common question I receive from owners considering selling their business. I’m sure their initial concerns are about timing the sale in the overall climate of the business sales market, the state of the economy, and often concern that a buyer may not be able to fund the purchase. Although owners want to consider all factors when selling their business, the answer has less to do with market conditions and more to do with the current state of the business for sale, as well as the owner’s reasons for selling. Buyers typically are concerned about Future Maintainable Earnings, how they will be achieved, and risk factors that may affect them.
Reason for Sale (Most Important)
The personal goals or circumstances in the lives of the owners are usually the most important factor in timing the sale of your business. Whatever the reason for the sale of the business (divorce, distress, retirement or health being the most common), if it is the right time for the owners, it is usually the best time to sell. By waiting or delaying the sale as a result of speculation about current market conditions the owners may be putting themselves in a bad position.
Overall Market Conditions (Not so Important)
Business (SME’s) sales statistics over the years have shown a general trend to increase during times of higher unemployment and slower economic activity. However, there has not been much fluctuation in sales price despite changes in overall economic conditions. Recently perceived restrictions on lending by mainstream banks have slowed sales by only a small percentage. Our experience is that well presented business loan proposals are being given favourable consideration – in fact in one case two banks competed vigorously for the business.
In summary, as you think about selling your business, all of your goals should be considered, however, it is always better to begin the process early and make sure you have plenty of time to do the job right.
State of the Business (Important)
The current condition of your individual business is a significant factor in timing its sale. Businesses that show a strong track record of steady or increasing sales and profitability will always sell faster and for a better price than those that are in a decline. If your business is up or steady, this is a better time to sell. No matter the global or macro economic factors surrounding your business, if your business is steady, the demand for it and the sales price will follow. In preparing and managing the sale of your business please refer to my earlier blog or contact me for a copy of our publication ‘Managing the Sale of Your Business’.
Where will the Buyer come from? (Important)
Experience tells us that buyers come from the least expected places. Locally, other parts of New Zealand, and even overseas. Their motivations are also varied. Examples are; Lifestyle Change, Security, Freedom to do their own thing, and many other reasons. It is important therefore that no stone is left unturned in the search for the buyer that has the ability to operate the business, and also the wherewithal to make the purchase.
Who do I talk to?
Our recommendation is that you contact a Business Broker with the experience in business sales who can guide you through the preparation and management of the sale process.
Articles by Brett Clarkson
- Free Seminar - Managing The Sale Of Your Business - September 30th, 2011
- Postponement - Managing the Sale of Your Business - September 9th, 2011
- Unlock a Fresh Perspective - August 31st, 2011
- Achieving the best value from a Business Sale - January 28th, 2011
- Business Sales New Zealand Ltd t/a Link Business Sales - January 26th, 2011