GMO Buy a Business

3 Principles Of Timing The Sale Of Your Business

Selling your business for maximum value is an enormous accomplishment. Whilst a good business broker can assist you, it’s also a feat that rests squarely on the shoulders of the owner. The business broker cannot run this race for you. If you want to sell your business for top dollar someday, timing will be a big part of the equation. Following are three principles of timing the sale of your business:

Sell when your business is on an upswing

Selling a business is often a counterintuitive process. One of the many ironies of business ownership is that the best time to sell your business is when you’re least likely to consider it. Who wants to leave the party when sales and profitability are at an all-time high? Many business owners make the mistake of trying to sell when financial performance has flattened out, or (gasp!) started declining. There’s a misconception that you can explain away lacklustre numbers with self-deprecating excuses. These might include the lack of installing a formal sales team, admitting that business decisions were made for personal reasons, or not having the heart to fire employees or trim certain expenses. Buyers are smart and cautious, however, they will typically only pay for what your business is worth today. They rarely pay much more for past performance or future potential. While the past and present factor into their analysis, the valuation of your business will be heavily influenced by the most recent fiscal year.

In keeping with a sports analogy, athletes work hard to peak at just the right time — the Olympic games, Wimbledon, the Melbourne Cup are all about optimum timing. The same holds true for selling your business. If you want the big money, you’ll need to sell your business at its peak.

Sell when the market is good

My GMO Partner Jim Goodwin and I have been working in the business-for-sale marketplace since 1991. To say that the window of opportunity for selling a business opens and closes during economic and interest rate cycles is quite accurate. The market for selling a business happens to be excellent right now, with a lot of people in mining services and St Georges Terrace service firms being made redundant and considering a business purchase. Remember that the job market is a competitor to the business sales market. This is one point in a seven year cycle where the job market is a weak competitor! The window of opportunity is open to sell well for the next year. Smart business owners sell when the market is good or improving, so do not be lulled into a false sense of comfort and stay too long.

Sell when you’re ready to let go

Even if the first two conditions are in place, you’ll have a hard time getting across the finish line if your head isn’t in the game of selling. Selling a business can be a long and often gut-wrenching process. If you’re not 100% ready and committed to going through with a sale, it can be best not to leave the starting gate. It will take a team of talented people to help you sell your business including your GMO broker, your accountant,your financial planner and (of course) your family.  Whether or not you get top dollar, however, will depend largely on when you decide to pull the trigger. Timing is everything. Is 2017 the right time for you?

 

Contact GMO if you’d like to discuss whether now is a good time to sell your business.

Graham O’Hehir
GMO, Managing Director