CEO Advisor Newsletter December 2019
Top 20 Reasons For When to Sell Your Business
As an industry expert on mergers and acquisitions, CEO Advisor, Inc. can help you identify the optimal time to sell your business.
Below are the 20 common reasons for when to sell your business:
1. Your Business' Value Has Improved SignificantlyWhen your business has grown substantially, it can be the optimal time to sell. Running a business is risky, and the bigger you get, the larger the risks you have to face. The value of your business is not liquid until you go through the transaction of selling your company and realizing the opportunity.
2. You Receive an Offer Too Good to Turn DownIf a buyer presents you with an offer you can't refuse, it can be ample reason to accept and sell your business. Such an offer is usually priced way above the market value of your business. This kind of offer is rare, so you wouldn't want to pass it up because you may not get another one like it in the future. Your optimal method is to prepare for and initiate a sale process to many potential buyers, but you never know when a serious buyer is going to knock on your door.
3. You Don't Have the Energy, Skills, or Capital to Grow the BusinessOne primary reason to sell a business is that you don't have the energy, time, experience, skills, and capital to take the business to the next level. A business should continually grow, and as business owners, there will come a time when you'll feel you can't generate substantial growth. This is the right time to sell your business and entrust it to those who have the skills and resources to grow it to the next level.
4. You Experience Fatigue or Lack of AlignmentIf you got into a business for the wrong reasons or the market opportunity has changed dramatically, you will eventually experience a certain level of exhaustion that will no longer be healthy for you physically, emotionally, and mentally. If you think that there is no quick fix for the burnout you feel, then it's time to sell and realize the opportunity of today's extremely high valuations.
5. Your Business Has Substantial Sales GrowthOne reason entrepreneurs choose to sell their business is that it has experienced substantial growth. This is extremely appealing to buyers and you can gain a higher valuation from the sale. Some business owners just want to take a lump sum of money from the sale, and the best time to do this is when you can show substantial and consistent sales growth and earnings.
6. Your Personal Interests ChangeAfter years of running and growing your business, you may conclude it doesn't feel as interesting and exciting as when you started it, and you're losing your passion in your business. This is a sign that you should consider selling it. Over time, it's normal for your interests to change, and you should capitalize on the right opportunity to sell.
7. Your Business Doesn't Have the Capital to Grow or Survive Long-Term in a Highly Competitive MarketPrivate small and mid-size businesses are highly illiquid and risky assets. Without adequate capital, you can't realize the full potential of your business. If you need more liquidity and are presented with the possibility of selling your business, you should consider this opportunity. This can be more advantageous today given the high valuations.
8. You Want to Have a Fresh StartEntrepreneurs have other motivations to sell their business and one of these is the desire to start a new one. Some entrepreneurs go into business because they want to start and build something bold and take a risk. This is what drives their spirit. If a business has already reached a certain point of growth and stability, some entrepreneurs just want to move forward, sell the business to cash out their hard work, and start something new and exciting. Although you need to plan on staying a year or two with the buyer in order to get a deal done, starting the sale process now will get you to your goal sooner.
9. You Need More Time for Your Personal LifeAt some point, as a business owner you will finally realize that running a business takes too much of your time. When the time comes that you will need more time for your family, to take care of your health and/or your personal life, then selling your business is a good way to do it.
10. Your Overall Exit Strategy Is to Sell Your BusinessThere are business owners who invest in building a thriving business to eventually sell later on at an optimal time for a huge sum of money. If this is your purpose for starting the business in the first place, then it's a great reason to sell the business as soon as you have reached your desired growth. Having an exit strategy is critical to every business, and CEO Advisor, Inc. can help you to discuss your options, formulate an exit strategy, prepare for the sale of your business, and execute the sale process at the proper time. 11. You Want to RetireThe majority of entrepreneurs plan to sell their business as an exit strategy to provide a comfortable retirement. Most business owners plan to sell their business rather than keep it in the family or hire someone to run it in their place when they retire as this is very risky. The driving force for this stems from the lifestyle many entrepreneurs face and lack of savings for retirement.
12. You've Achieved Long-Term Financial SecurityOne reason to sell your business is if you have achieved a certain level of financial security from running the business and you want to step down and start a less stressful lifestyle. You don't need to fully retire to do this, as you can take on a temporary lesser role or a consulting role after an acquisition. There are often options such as a majority sale to a Private Equity firm, and CEO Advisor, Inc. has the expertise to manage this for you. At this point, you want to sell all or a majority of your business when valuations are peaking.
13. You Feel Physically & Mentally ExhaustedAs a business owner, you are most likely the hub of your business and make most of the decisions. This can be physically and mentally draining, and the time will come when your responsibilities as a CEO or business owner will take its toll on you. If you feel physically and mentally exhausted running the business, then it's time for you to initiate an exit and sale process. Don't wait until an illness or excessive fatigue sets in before you decide to sell, as the buyer will fully expect you to remain with the company for 1 - 2 years.
14. You Want to Take Advantage of Low Capital Gains TaxesThe tax rate on capital gains is at an historically low level. This is one good reason to sell your business and enjoy low tax rates if you can achieve a straight stock purchase. If you are at an age near retirement, or if you have already grown and stabilized your business, then it may be best to sell your business and take advantage of taxes at such relatively low levels.
15. You've Become More Risk-AverseRisk is essential to your business' continued growth. If you have become risk averse, and you get to the point that new opportunities invoke more fear than excitement, it is a sign that you should sell your business. Becoming too conservative means losing your drive to grow the business, and this alone is a good reason to sell.
16. Your Business Partner Wants to SellIf your business partner wants to call it quits and move on, you have the option to either buy out his/her shares and own the business entirely, or just sell the business to a third-party. Most of the time, the second option is more prudent because you may not have the capital or want to borrow substantial funds to buyout your partner.
17. A Sudden Lifestyle Change Affects Your BusinessCEOs and business owners need to understand that there should be a clear delineation between their personal lives and their business. If a sudden lifestyle change (like getting married, divorce, health issues, going back to school, or giving birth) becomes a conflict with your commitment to your business, then it's time to consider selling.
18. You Struggle with Poor Business PerformanceRunning a struggling business can be very stressful and demotivating. If you notice that your business' performance doesn't improve, even after you have exerted a lot of effort and invested many resources to grow the business, then perhaps it's time to consider selling it to someone who has the skills and money to revive and grow it. Just don't expect to secure an optimal sale price or terms.
19. Your Business' Industry Is Thriving or You See a Decline LoomingIf your business' industry is thriving, it's a good time to sell your business. A business in a thriving industry will likely sell for more than if your business' industry is struggling. You can take this opportunity to sell your business while there are more acquirers interested in buying it at a good price. It's important to pay attention to industry trends, as it will benefit you when you decide to sell.
20. You Have Health Issues or You are in Your Sixties with Previous Health IssuesIf you think your business has cost you your health, then it's time to seriously consider selling it. Facing serious health issues is one of the most common reasons why some business owners choose to sell their business. After all, it's best to prioritize your health, and capitalize on today's lofty valuations.
Bottom Line - When to Sell a BusinessThere will come a time when you will need to sell your company. The right time to sell a business is based on various reasons, such as economic conditions, industry trends, valuations, personal situations, and professional considerations.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
Planning For Success in 2020
We are hands-on advisors that roll up our sleeves and perform desired work with the expertise you need. First, we ask CEOs critical questions about planning and managing their business such as:
- Does your company have a strategic plan?
- Does your company have a defined sales strategy to maximize sales?
- A marketing plan and budget to optimize leads and fuel sales?
- A clear path to increased Net Profits?
- An exit strategy that enables you to maximize the sale of your company at the right time for you?
Every business needs to plan. Unfortunately, there is a myth that associates business planning with start-ups. As a CEO or owner of a small or mid-size business, can you afford not to plan? Do you prioritize, focus and manage your time, staff and growth proactively?
Benefits of Planning
1. Proactively Guide Your Growth
Your business will grow or not depending on many factors, including overall economic trends, size of the industry, growth of the industry, specific market needs, your products/services, sales management effectiveness, proper management of labor, hard work and other elements. Businesses that plan do it to guide and accelerate their growth so they move proactively towards defined objectives, higher profits and higher value when deciding to sell rather than just reacting to business events, which is very risky and costly.
2. Manage Priorities
Goal setting involves focusing your time where it will generate the most sales and profit. Manage the company by prioritizing your most important goals according to your long-term objectives and plan.
3. Assign Responsibilities
A plan gives your company efficiency, accountability and develops organizational responsibilities. Clear accountability and responsibilities drive businesses forward, increase sales and profits, and build value for an optimal exit.
4. Track Progress
With a written plan, you can track your progress towards your defined goals and measure results. Without a plan, how can you tell whether or not you are moving in the right direction or measuring success? In addition to your financials, create a management dashboard to consolidate your reporting to optimize your decision-making and success.
5. Manage Your Cash Needs
Most businesses don't plan well for their cash needs, yet this is critical to all companies. Financial forecasting is not only strategic to your business, but critical to setting goals for Sales, Gross Profits and Net Profits which are at the core of every business.
Business Planning is Critical to All Sizes of Companies
Strategy:Strategy involves taking a hard look at your products and services, your core competencies and management team, your target markets, sales strategy, geographic sales coverage, your customers, pricing, operations, sales and marketing. Bring in the needed expertise to ensure your strategy yields success and optimizes sales, profits and the value of your business.
Define Responsibilities, Goals, Tasks, Deadlines and Budgets:We collectively call these Milestones. These key aspects of business planning are critical to business success.
Financial Forecast:One of the most important aspects of strategic planning is the financial forecast. A business needs to set financial goals and targets to truly measure its success and drive the business forward.
CEO Advisor, Inc. has the expertise, coupled with hands-on advice to help you plan, strategize, grow and succeed. Call Mark Hartsell, MBA, President of CEO Advisor, Inc. today at (949) 629-2520, text Mark at (714) 697-3370 or email MHartsell@CEOAdvisor.com to schedule a free initial consultation.