When you think about investing in the stock market, you approach it with a buy low and sell high mentality.
Let’s be honest, the stock market mimics a roller coaster. Depending on that particular ride, you will either enjoy a gradual up and down with the ability to see trends or a dramatic ride that spikes up only to dramatically downturn. We all aim to buy right before the ride turns up.
Unlike the roller coasters at Disneyland, you’ll never fully be able to predict the ups and downs.
But you can make educated guesses based on past trends. Equipped with that knowledge, timing is everything when you go to invest. You would never go to your financial broker and inform them you decided to invest because you felt like it. It would be because you made an educated decision based on timing and trends.
The same applies to your business.
As you’ve owned your business, you’ve weathered constant up cycles and down cycles. The key is to sell at the up cycle (aka sell high). Too often, business owners decide to sell their business when they lose the zeal to continue with the day-to-day. They feel it’s time to move on and move to sell the business. That’s typically a down cycle.
Just like the market, “I feel like it,” isn’t the best approach. Particularly when less than 20% of businesses actually sell, you need to give yourself every edge you can in the market. Timing your exit at an up cycle is your biggest advantage.
Remember, buyers will also approach your business as an investment. All the same rules apply, especially since their other option is to actually invest in the market. Buyers want to see the potential and how they can take the business from where it is today and grow it. In order for that to happen, it needs to be on an upward trajectory.
When considering selling your business, you need to view this “investment” through the eyes of a potential buyer:
- Predictions on how long until they make their money back.
- What is their opportunity for return?
- What size market does the business serve?
- Is that market growing?
I see a tendency for owners to wait until business is down, key employees have left, and they are putting in 60 hours a week just to make ends meet. It’s your fighter instincts and perpetual optimism that grew the business to where it is today. Unfortunately, those two traits often hinder a successful exit. By the time you hit your breaking point, the best time to sell the business has already passed.
Those businesses become “turn around” companies. They parallel a run-down home. The buyer hopes to swoop in with a very low offer, and they make money when they flip it.
If your goal is to make money on the sale of your business, you do not want to be classified as a “turn around” company.
While it will be hard, you need to push those fighting instincts and perpetual optimism to the background and view your business as an investment. What cycle are you on? Take an educated assessment based on past trends and market insights.
When is the most strategic time for you to exit?
To help you determine the right timing to sell your business, as well as to implement strategic value drivers to increase sale price, contact me today. Together we can help build a tactical business exit that can help you come out ahead when selling your business.
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