Is now the right time to sell your business? In 2022, that question will lead you down a rabbit hole of politics, economics, moving targets, changing dynamics, and perhaps some fatigue from the trudge through a global pandemic. Without focusing on whether or not we’re in a recession, let’s talk about the idea of timing the market—not just right now, but any time in the future. There are many things to consider and most of them aren’t as macro as you might expect. Here are the main factors to keep in mind. The last one gives most business owners pause.
1. Market Conditions
All markets affect the value of all businesses. Whether the economy is good, bad, or ugly, your business and your ability to sell it will be impacted in some way, shape, or form.
Take the economy at face value. Timing the market isn’t as simple as capitalizing on a hot economy or getting out before a downturn. Businesses still sell in difficult economic conditions, and many don’t sell even in the best of times. During the pandemic, some industries were decimated while others boomed beyond belief. Nevertheless, you certainly want to understand what the market is doing, where it’s trending, and how the macroeconomics might affect the timing of your exit if you’re looking to sell.
2. Risk vs. Reward
Market readiness is only one part of exit readiness. More important is owner readiness. Are you truly ready to embark on the emotional journey of the exit, let go of the business, and move forward in life? As an entrepreneur, you are a risk taker. Business is like gambling. You believe you’re going to win, and you always want more. If your business is salable and the market is favorable, it will come down to risk vs. reward.
Should you stay in business for another couple of years, put more into it, and hope that you get more money out of it? The risk is that we only know the value of the business today, and that value could go down. We can try to predict the future, but there’s no way to know what will happen in your business or in the world. The reward, of course, is that your business could grow and, in turn, so could the sale price. Owner readiness is when you’re ready for the reward without the risk.
3. The Disciplined Decision
The third part of exit readiness, alongside market and owner readiness, is business readiness. The business must be salable. The biggest risk—even bigger than the risk of a market crash—is that you could hold on to a salable business for too long and the value could diminish to the point where it’s no longer salable.
Remember, we don’t know what the business will be worth tomorrow or the next day, much less next year or several years down the line. We all get enough doom and gloom from the news, so we won’t rattle off the things that could go wrong. Just know that the time to exit is when things are going right. It can be extremely difficult to exit when you’re at the top of your game, but it’s the disciplined decision to achieve your Win.
4. The Key Definition
Don’t waste time squabbling over the definition of a recession. It means nothing on the micro level that is your exit. The definition that does matter, however, is your definition of “enough.” More money will always sound nice. More business will always be enticing, but how much is enough? Only when you have a clear definition of “enough” can you begin to think about timing the market accordingly.