First, is general market timing. The bottom line is that your company is worth as much as a buyer is willing to pay for it. If the market is hot, that’s good, because it means buyers have more money on hand for deals. That’s the case right now. This is why, broadly speaking, right now is best time to sell a market in over a decade. However, we all know this seller’s market will not last forever.
Second, is before retirement timing. What we mean by this is that many business owners wait until they are ready to retire or already burnt out. By this time the owner is generally on auto-pilot and no longer looking to acquire new business. As we have talked about in previous articles this can drastically decrease the number of potential buyers and lower the valuation of a business. Most all buyers are looking for businesses where the owner is willing to stay on for a period of time to help with the transition. This can be as little as 30 days, but many times this can be three years or more due to the complexity of the business, the management team already in place, and the buyer’s strategy. In general, the longer a business owner is willing to stay on to help support a new owner the higher the valuation.
The most important time to sell that will have the biggest impact on the demand from potential buyers is to sell your business when things are going well and business is increasing. How do we define “going well”? This can be quantitative or qualitative. An example of qualitative would be having long term employees in place that can run the company themselves. The quantitative measure can be top line or bottom line growth (preferably bottom line). There isn’t any defined percentage growth. It will be based on historical trends and hitting business goals.
We are currently in a seller’s market so you might want to talk to a Business Broker or M&A Advisor today especially if business is going well and you are thinking about retirement within the next few years.