Alejandro has guided multiple acquisitions as an M&A advisor for hyper growth companies. Learn how to Sell Your Business.
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How To Know When To Sell Your Business
Finances are a critical aspect of any business. Note that
making more money is often the greatest desire for your
investors, if not the founding business owners. Knowing
that you can sell your business at a maximum price point
will help you realize your business's full value.
First off, you must identify your needs and the reason for
your exit. This will help you sell your business at a price
that will suit all your needs. You have to work hard to
keep your business on the high to sell it well. A valuable
company is a worthwhile investment for potential buyers.
If your business has a significant market share, competitors and other potential buyers will be interested in
purchasing to enhance their market share and presence. Note that the money you will achieve from the sale varies
depending on the potential buyers' circumstances and the deal structure.
A business experiencing a decline in profits may not be of great interest to potential buyers. At least, many of
them will be willing to pay less because of this. So, it helps to drive your business to a stronger financial position
before you even think of selling it. Doing so will enable you to negotiate a higher sale price and ensure that the
new owner propels the success of your business in the future. A revival of your business will increase its value
and reputation, enabling you to negotiate from a stronger negotiating position.
How Prepared Are You?
The success of selling your business sits on your shoulders. What are your expectations? Do you have all it takes
to endure the stressful process? You have to take a step back and reflect on your decision to sell your business.
Are you sure you want to sell your business? Does it excite you? Do you find the excitement of going to work
every day amidst the reeling challenges? Do you feel motivated running your business? Or are burnout and fatigue
suddenly catching up with you? If coupled with the thoughts of running your business for the next 10 or 20 years
make it even worse, you've probably lost your interest. Low spirits and a lack of motivation may indicate that you
don't want to continue running the business, and it's the best time to exit.
Despite the burnout, you have to spare some energy for negotiations and communication with potential buyers.
All while performing everyday tasks for some months before completing a sale. Remember that you have to sell
your company when it's still riding high. So there's no chance of disengaging yourself from the business during
ongoing negotiations to sell it. Also, depending on the sale's terms, you may have to stay involved for some time,
even after completing the sale. Both to ensure an effective transition and receive any earnout and performance
related proceeds.
What are your long-term goals? You should have a clear outline of your next move after making the sale.
Whatever you plan to do, you must ensure that your decision is based on your long-term personal objectives and
determine whether the sale can suit your goals.
It's one of the difficult decisions for business owners to make. A straightforward piece of advice: Doing it alone
can be a daunting task. A team can save you time, money and prevent frustrations in the process. Having an adept
team of financial, legal, and deal making professionals will help you develop a strategy to help you overcome
unforeseen challenges and optimize the transaction. They will help you to negotiate the best value for your
business, so you can focus on operating your business during the process.
Loss of Interest
Losing interest is a common situation among many business owners. You're often motivated to run your business
during the initial stages to set it up for greatness as a business owner. However, after years of hard work building
your company, you find that operating your business on a daily basis becomes a grind, resulting in the loss of
appeal. It's normal to feel like that, but also a tricky situation for any business owner. What happens next? You
lose the passion and motivation to keep your business on track. It, therefore, becomes challenging to commit your
effort to solve any business-related issues, inject more resources, and balance your financial books. Even worse,
it may spell doom for your business, resulting in the inevitable—poor decision-making and low standards.
As a skilled business owner, it's essential to recognize and note these signs to avoid many challenges. At this
point, you have to consider selling your business before you start falling. Failure to do so will affect the reputation
and value of your company among potential buyers.
The Decline of Resources
Even if your passion for your business is still strong, you may feel limited by resources. Letting go of your
personal preferences becomes necessary when your company's resources begin to decline because of
uncontrollable situations. You may have excellent business concepts and ideas to the extent market leaders start
to contact you showing an interest to purchase. Don’t ignore them.
A great idea without the necessary input and resources is dead on inception. It may be a difficult decision to make,
especially when you take a trip down memory lane to track your hard work and business progress. But when
people come knocking on your door with plenty of resources to invest, you've got to consider selling the business
to realize its vast potential. You may realize that selling is the best decision for your business's long-term survival
and success.
The Need To Change Ownership
Regardless of the passion for, or the personal feelings attached to your company, you have to carry out an objective
self-assessment to check your own contribution to the company. If your contributions are falling short of what is
needed to realize the full potential here, then you should consider a sale. You can keep growing your skills and
leadership abilities. As companies grow they need different skill sets and experience leading from the top. If you
can’t hire these people, or bring them in as equity partners, your goals for the company may be best executed by
a new owner.
As much as it's a hard pill to swallow, your exceptional skills used to build the company from scratch have to
undergo a thorough re-assessment. Remember that you built your business from scratch. You can do it again.
You may either choose to sell and merge with a company that can take it to the next level, and continue to be a
part of that. Or you can go back and build something new out of nothing.
Your Business Is Optimized For A Buyer
As we mentioned above, positioning for a sale from a stronger financial position will enable you to sell it at a
higher price and on preferable terms.
Anything you can do to reduce risk, and optimize the upside for them can make a big difference. The timing is a
big part of this.
If you're looking to sell your business, it's necessary to look at the following factors:
Risk spread: Risk management is a top consideration for anyone who wants to sell their business or buy
one. The best way to do this is to diversify your customers instead of relying on a few high-value clients.
Do you have well protected IP? Are your legal and accounting records clean and organized?
Future growth and investment potential: If you assess your business and find that it has enormous
future potential and can grow significantly with the right business leader, you should consider selling it.
Painting the right vision with your presentation can add a lot of value for those seeking to grow their
own companies.
Keeping this in mind will help you negotiate with potential buyers from a stronger financial position that will
enable you to achieve the maximum price and optimal terms. You've worked hard already, so make sure to put in
the effort to carry it across the finish line, and realize the full value of your business.
Seek Professional Advice
It can be pretty stressful to sell your business on your own. Valuation, identifying trends, conveying your financial
position, and preparation can be a lot for one person. Fortunately, there are skilled professionals to whom you can
reach out for advice to solidify your decision to sell your business. These individuals will help you to find the
perfect time to sell your business, and guide you through it.
Conclusion
There is no perfect time to sell a business for all. There are many dynamic changes in business, making it difficult
to spot the right time to execute a sale. However, paying attention to the above essential tips and relying on
professional advice can help you find the right time to sell your business. Don’t pass up on opportunities when
they arise. You never know what is going to happen if you try to hold out too long.
Author Bio
Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword
by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley & Sons, the book was named one of the
best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for
entrepreneurs.
Most recently, Alejandro built and exited CoFoundersLab which is one of the largest communities of founders
online.
Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding where he was involved in one of the
biggest investment arbitration cases in history ($113 billion at stake).
Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia
Business School, and NYU Stern School of Business.
Finances are a critical aspect of any business. Note that
making more money is often the greatest desire for your
investors, if not the founding business owners. Knowing
that you can sell your business at a maximum price point
will help you realize your business's full value.
First off, you must identify your needs and the reason for
your exit. This will help you sell your business at a price
that will suit all your needs. You have to work hard to
keep your business on the high to sell it well. A valuable
company is a worthwhile investment for potential buyers.
If your business has a significant market share, competitors and other potential buyers will be interested in
purchasing to enhance their market share and presence. Note that the money you will achieve from the sale varies
depending on the potential buyers' circumstances and the deal structure.
A business experiencing a decline in profits may not be of great interest to potential buyers. At least, many of
them will be willing to pay less because of this. So, it helps to drive your business to a stronger financial position
before you even think of selling it. Doing so will enable you to negotiate a higher sale price and ensure that the
new owner propels the success of your business in the future. A revival of your business will increase its value
and reputation, enabling you to negotiate from a stronger negotiating position.
How Prepared Are You?
The success of selling your business sits on your shoulders. What are your expectations? Do you have all it takes
to endure the stressful process? You have to take a step back and reflect on your decision to sell your business.
Are you sure you want to sell your business? Does it excite you? Do you find the excitement of going to work
every day amidst the reeling challenges? Do you feel motivated running your business? Or are burnout and fatigue
suddenly catching up with you? If coupled with the thoughts of running your business for the next 10 or 20 years
make it even worse, you've probably lost your interest. Low spirits and a lack of motivation may indicate that you
don't want to continue running the business, and it's the best time to exit.
Despite the burnout, you have to spare some energy for negotiations and communication with potential buyers.
All while performing everyday tasks for some months before completing a sale. Remember that you have to sell
your company when it's still riding high. So there's no chance of disengaging yourself from the business during
ongoing negotiations to sell it. Also, depending on the sale's terms, you may have to stay involved for some time,
even after completing the sale. Both to ensure an effective transition and receive any earnout and performance
related proceeds.
What are your long-term goals? You should have a clear outline of your next move after making the sale.
Whatever you plan to do, you must ensure that your decision is based on your long-term personal objectives and
determine whether the sale can suit your goals.
It's one of the difficult decisions for business owners to make. A straightforward piece of advice: Doing it alone
can be a daunting task. A team can save you time, money and prevent frustrations in the process. Having an adept
team of financial, legal, and deal making professionals will help you develop a strategy to help you overcome
unforeseen challenges and optimize the transaction. They will help you to negotiate the best value for your
business, so you can focus on operating your business during the process.
Loss of Interest
Losing interest is a common situation among many business owners. You're often motivated to run your business
during the initial stages to set it up for greatness as a business owner. However, after years of hard work building
your company, you find that operating your business on a daily basis becomes a grind, resulting in the loss of
appeal. It's normal to feel like that, but also a tricky situation for any business owner. What happens next? You
lose the passion and motivation to keep your business on track. It, therefore, becomes challenging to commit your
effort to solve any business-related issues, inject more resources, and balance your financial books. Even worse,
it may spell doom for your business, resulting in the inevitable—poor decision-making and low standards.
As a skilled business owner, it's essential to recognize and note these signs to avoid many challenges. At this
point, you have to consider selling your business before you start falling. Failure to do so will affect the reputation
and value of your company among potential buyers.
The Decline of Resources
Even if your passion for your business is still strong, you may feel limited by resources. Letting go of your
personal preferences becomes necessary when your company's resources begin to decline because of
uncontrollable situations. You may have excellent business concepts and ideas to the extent market leaders start
to contact you showing an interest to purchase. Don’t ignore them.
A great idea without the necessary input and resources is dead on inception. It may be a difficult decision to make,
especially when you take a trip down memory lane to track your hard work and business progress. But when
people come knocking on your door with plenty of resources to invest, you've got to consider selling the business
to realize its vast potential. You may realize that selling is the best decision for your business's long-term survival
and success.
The Need To Change Ownership
Regardless of the passion for, or the personal feelings attached to your company, you have to carry out an objective
self-assessment to check your own contribution to the company. If your contributions are falling short of what is
needed to realize the full potential here, then you should consider a sale. You can keep growing your skills and
leadership abilities. As companies grow they need different skill sets and experience leading from the top. If you
can’t hire these people, or bring them in as equity partners, your goals for the company may be best executed by
a new owner.
As much as it's a hard pill to swallow, your exceptional skills used to build the company from scratch have to
undergo a thorough re-assessment. Remember that you built your business from scratch. You can do it again.
You may either choose to sell and merge with a company that can take it to the next level, and continue to be a
part of that. Or you can go back and build something new out of nothing.
Your Business Is Optimized For A Buyer
As we mentioned above, positioning for a sale from a stronger financial position will enable you to sell it at a
higher price and on preferable terms.
Anything you can do to reduce risk, and optimize the upside for them can make a big difference. The timing is a
big part of this.
If you're looking to sell your business, it's necessary to look at the following factors:
Risk spread: Risk management is a top consideration for anyone who wants to sell their business or buy
one. The best way to do this is to diversify your customers instead of relying on a few high-value clients.
Do you have well protected IP? Are your legal and accounting records clean and organized?
Future growth and investment potential: If you assess your business and find that it has enormous
future potential and can grow significantly with the right business leader, you should consider selling it.
Painting the right vision with your presentation can add a lot of value for those seeking to grow their
own companies.
Keeping this in mind will help you negotiate with potential buyers from a stronger financial position that will
enable you to achieve the maximum price and optimal terms. You've worked hard already, so make sure to put in
the effort to carry it across the finish line, and realize the full value of your business.
Seek Professional Advice
It can be pretty stressful to sell your business on your own. Valuation, identifying trends, conveying your financial
position, and preparation can be a lot for one person. Fortunately, there are skilled professionals to whom you can
reach out for advice to solidify your decision to sell your business. These individuals will help you to find the
perfect time to sell your business, and guide you through it.
Conclusion
There is no perfect time to sell a business for all. There are many dynamic changes in business, making it difficult
to spot the right time to execute a sale. However, paying attention to the above essential tips and relying on
professional advice can help you find the right time to sell your business. Don’t pass up on opportunities when
they arise. You never know what is going to happen if you try to hold out too long.
Author Bio
Alejandro Cremades is a serial entrepreneur and the author of The Art of Startup Fundraising. With a foreword
by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley & Sons, the book was named one of the
best books for entrepreneurs. The book offers a step-by-step guide to today‘s way of raising money for
entrepreneurs.
Most recently, Alejandro built and exited CoFoundersLab which is one of the largest communities of founders
online.
Prior to CoFoundersLab, Alejandro worked as a lawyer at King & Spalding where he was involved in one of the
biggest investment arbitration cases in history ($113 billion at stake).
Alejandro is an active speaker and has given guest lectures at the Wharton School of Business, Columbia
Business School, and NYU Stern School of Business.