When is it time to sell your business?

When is it time to sell your business?

When a person decides to start a company, it is normally with the idea of having a long lasting business. However, the business world is very dynamic and many things can happen that might lead you to the conclusion that perhaps it is time to sell your business. In this article, I will go over the different situations that point you in the direction to sell your business and give you some guidelines on how to proceed.

Under what circumstances should you sell your business?

The reasons why a person might decide to sell his business are countless. As a consultant for many years I have found six common triggers for an owner to consider selling his business.

You think more about other projects than about your own business: To a grow business to its maximum potential requires a total commitment and dedication of the partners at both, the operational and investment level. If you find yourself thinking about other projects, or working from 8 to 5, or pouring resources into other things when the business demands capital, then it is time for you to sell your business and move on to something new that makes you tick.

You achieved your goals: This is one of the main motivations to sell. The saying “you work to live; you do not live to work” sums up the concept. Many entrepreneurs start a company with the idea of making money to enjoy life at a later time. When a business is set up with this idea in mind, the concept of an exit strategy is embedded in the planning and development of the business so that, when the time comes, you simply activate the planned strategy to sell your business.

The business outgrew you: Many businesses start from the partner’s garage as a simple idea that hit the nail on the head and catapulted your business. Or maybe you’ve reached a point where the resources needed to sustain growth are beyond your capacity. This has been the case for several high-tech and app development companies. However, uncontrolled growth and lack of capital are among the most common reasons for companies to fail. When the growth is too abrupt and unplanned, it would be wise to sell part or all of the company to ensure its survival and the preservation of your patrimony.

Partner’s differences: People and their life goals change over time. It is very common for the interests of the partners in a business to change in opposite directions. If this happens the future of the business could be jeopardized. It is like two persons rowing a boat in different directions: the boat gets stuck. The best thing to do in this case is to sell the business either to the partner or to an outside partner.

The market has changed: Technologies and consumer needs are evolving by leaps and bounds. A product that is successful today in meeting a market need can no longer be useful in few years. Companies try to anticipate this with R&D departments but, as the 2020 pandemic showed sometimes the changes are so violent that it is better to sell your business.

Changes in your living conditions: Sometimes a key partner’s health deteriorates to the point where he/she cannot longer be active. In these circumstances selling the business to a partner who could ensure the business continuity might be the right choice.

Guidelines on how to prepare to sell your business

As you can see, the spectrum of reasons to sell a business is very wide and might be unexpected. My advice to any business owner is always considering exit strategies in the planning of the business. This is the best way to ensure smooth transitions and business continuation. These are a few things you can contemplate.

Have clear procedures for selling: Include in your company’s bylaws or operating agreements of the procedure for selling or buying company stock. The most common provision is to give priority to other owners, but if none can buy, there should be clear provisions on how to select the buyer.

Avoid one-person dependency: Any business that relies on a single resource to function poses a threat to its survival. Be it one product, one market, one source of capital, but especially one single person. Surround yourself with competent people and partners and learn to delegate while keeping control of the business.

Don’t wait to the last minute: If your plan is to sell your company at some point, the best time to sell is when the business is growing.hHave a financial backup plan: Many businesses end up closing due to an untimely death of the owner or a key person. One way to prevent this is by getting a “Key person life insurance policy”. These types of policies provide funds to help keep the company going while a replacement is found or someone buys the company.

Have all the documents permanently updated: This includes all the relevant information to assess the company: financial and legal information, organization and quality manuals, and operating procedures.

I hope this article has been helpful to you. I will continue posting information related to warehouse management, distribution practices and trends, and the economy in general. If you are interested in this article or want to learn more about Laceup Solutions, please subscribe to stay updated on future articles.

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