Selling Your Company
Did you ever think about selling your company when you started?
Probably not, right?
So, when should you be thinking about selling your company?
That is a tricky question to answer because there are so many reasons to sell your company. For example, I spoke with an individual last week who is looking at buying out his partner because of tariffs. Most of the individuals I speak with, sell because they are no longer interested in operating the business, they want to retire or they are fascinated with a new business concept. No matter what the reason is, the sale of your business represents an event that could either be viewed as advantageous or a nightmare. Preparing to sell your company takes time. Starting today can help you maximize the value of your business when you sell.
As a business appraiser, Peak Business Valuation works with individuals across the nation who plan to sell their business. Obtaining a business valuation is an important part of the process. It not only helps you understand the fair market value but also what drives that value. If you have questions about the value of your business, reach out, we are happy to help. Schedule a free consultation using the link below.
Disadvantages of Selling Your Company
It is important to understand the potential advantages and disadvantages of selling your company. Below we list some of the disadvantages of selling your business. However, these disadvantages can be avoided with proper planning.
Timeframe of Selling a Business
The average time to sell a business is between 6 to 9 months. Depending on the complexity of the transaction, the time frame may take longer. It is a misconception that there is only a buyer or a seller in a transaction. For instance, there could be brokers, business valuation specialists, lenders, etc. who participate in the transaction. Each party involved may not adhere to your time table. For more information see, Prepare to Sell Your Business.
Financing the Transaction
As mentioned above, one of the parties potentially involved in the transaction could be a lender. If the buyer is planning to finance the transaction through a small business loan like an SBA loan or some other debt instrument, you may face the possibility that the buyer does not qualify for a loan. Therefore, the transaction falls through the cracks. You could potentially finance part of the transaction, but that leaves some of your assets at risk. However, you might have to provide some seller financing in order for the buyer to qualify for the loan. Therefore, it is important to understand how the buyer plans to finance the transaction. See Debt verse Equity Financing.
If the buyer asks you to sign a non-compete agreement, will you sign? Most transactions are not entered into without a non-compete. A non-compete limits your ability to consult similar businesses or start a similar business. If you are retiring this does not pertain to you. However, if you are at all interested in remaining in the field for which your company operates, sell part of your business and take a more passive role in the management of the company.
Advantages of Selling Your Company
Below are a few of the many benefits of selling your company. Selling at the right time and at the right price can bring freedom and peace of mind. Confidently selling your company starts with a business valuation. Peak Business Valuation is the highest-rated, most reviewed business appraiser in the country. We are happy to help you in the process of selling your business. Schedule your free consultation.
As mention in the last bullet point above, you can potentially maintain involvement with the business as an advisor or an executive. Assist the buyer during the transition and take a more passive role in the company. You collect some capital now and still maintain equity ownership without the stress of managing a company. Sounds like an awesome deal. For suggestions on effectively transitioning your business read Tips for Transitioning to a New Owner.
Sell When Company and Economy are Up
As mentioned in the following article, you might find that now is the most advantageous time to sell due to market conditions. You never know when the right time to sell is, but you want to consider the possibility of exiting at the highest possible price if possible. You will know when to sell, when you begin to attract the right buyers. A business valuation can help you understand the current market conditions. It will also identify opportunities to maximize the value of your business prior to selling.
Access to Capital and Time
Lastly, selling your business provides a liquidity event to you. You are relieved from duties and the stress of managing a company. Take time to relax. Take the capital received and diversify your investments into different asset classes. If you are interested in starting a new business, set aside part of the capital to invest in a new business. The possibilities are endless after a liquidity event.
The sell of your company is a monumental event. Think carefully and converse with those you trust and see as advisors. Know the advantages and disadvantages of exiting your business. Proper planning can help to ensure a successful exit.
Peak Business Valuation, business appraiser, works with individuals across the country who are selling their business. An important part of the process is understanding the value of your business. A business appraisal will determine the fair market value which can aid in determining a listing price. A business valuation is also a useful tool for negotiating the purchase price with a potential buyer. If you plan on selling your company, a business valuation can also help you make a plan to maximize the value. If you have any questions, we are happy to assist you and/or point you in the right direction if needed. Schedule a free consultation today to get started!
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