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Timing Is Everything: Successful Small Business Owners Know When to Hold and When to Sell

Timing Is Everything: Successful Small Business Owners Know When to Hold and When to Sell

Most individuals these days usually delve into entrepreneurship after their college days. With the rise of a lot of small businesses, sole proprietors have to learn some of the basic tools of doing business, which usually bores down to knowing how to buy and sell. Often the holding period between when a business starts, or is acquired, until when it is sold or merged with another business is when most small businesses are tried for their worth. But, the holding period of most companies cannot be pre-determined.

It’s not really cast in stone of the lifespan of a company or how long it will take to grow a company into a proper profit-making venture. Some people have built a company and sold early only for it to die in the hands of the acquirers, some others have held on and lost, while yet some others have built and nurtured a company till it became a multi-billion dollar venture.

In a bid to build a successful business, timing is key. The time to hold onto the business and the time to let go and allow more capable hands take over can be a very decisive turning point. Hence business owners and sellers need to take some steps to craft a suitable timeline for the business and avoid some mistakes when selling the business.

Timeline Strategies for Building a Successful Business for Sale

  • Prepare the business for the ultimate sale from scratch When running a business, owners should start from scratch to prep the business for its ultimate goal– which is a sale or merger. The business should be running smoothly and should keep overtime documents and records of the cash flow of the business, statement of financial position, income statement, personnel records, and others. Most buyers request these documents before they make their purchase. Some minute details like scenery, painting, and design of the offices also matter to buyers.
  • Sale Price A business owner with a mind to sell his business must have established a desired sale price and work towards bringing the business up to and beyond that price. The most popular option is overpricing the business and working towards that overprice amount. In the event a buyer does not want to acquire at that price, the forced sale value should be the exact price at which the business owner would have initially sold it. Smart, right?
  • Hire experienced personnel A business owner grooming a business for sale knows too well to hire experienced people to prepare the business. Auditors, marketers, and investment bankers should be involved in the activities of the business from time to time. Their valuation and report would elicit trust from buyers who eventually acquire the business.
  • Know the possible buyers of your business A deep research into the niche of a business and other entrepreneurs who have sold or merged the companies could reveal who most of a business’s prospective buyers will be. With this, a business owner will know about his audience and how to build his business to their taste. Building to their taste would require that a business owner model their business to fit the nature of other businesses that have been acquired and also fit what the buyer tweaked after the buy. That’s the genius thing to do.

What to Avoid when Selling Your Business?

  • Using the wrong broker When selling a business, business owners should always keep in mind that a broker is the ambassador of their business. If a wrong or inexperienced broker is hired, the chances of selling the business for its worth, or even selling the business at all, are way too slim. Brokers should be hired on time to get the work done quickly; this also drives home the time factor in selling businesses.
  • Pricing Setting a very unrealistic price tag for the business could lead to no sale. As stated earlier in this article, professional valuers and auditors should be hired to value and give a quote on the business before the sale. Apart from that, the business owner should build their businesses to suit whatever price they intend to sell it for.
  • Selling to the wrong people Before a sale deal is closed, business owners should do a good background check on their prospective buyers and make sure there are no infractions or litigations against them. Taking the stress of building up a business with a good reputation and selling to the wrong people will definitely tarnish the image of the business in general. Buyers should also have a good record of managing businesses appropriately.

Conclusion

Most successful business owners have groomed and sold businesses in the past. The timing of selling the business is the most integral factor of the whole business grooming and sale. A business owner should know when to sell and when not to. Notwithstanding, what works for one business might not work for the next. So in building a business for sale, the business owner should write down their aim and have a proper timeline for how to grow the business to its selling point. This way, the timing for selling the business won’t be a problem.


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by Lori Wade // Lori Wade is a writer for DealRoom blog who is interested in a wide range of spheres from business to entrepreneurship and new technologies. If you are interested in M&A or virtual data room industry, you can find her on Twitter or LinkedIn.

Opinions expressed by contributors are their own.