Every business owner needs to acknowledge that they will want to leave their business at some stage. Therefore, thinking of a business exit strategy from the very beginning couldn’t be more important. Many things need to be borne in mind when exit planning, but perhaps the most vital has to be timing considerations.
Here at CBS-CBS.com, our consultants know how important it is to think well in advance about how to exit a business as early as possible. Therefore, we’ll take a look at how to know when the time is right to exit a business.
The Lifecycle Of Your Business
Whatever kind of business you have, it has its own lifecycle. Knowing where your company is within its own lifecycle is key since this will impact in a major way on how sellable your business is. While there isn’t a single perfect time for selling a business, if you know the exact stage that your business is at, you can ascertain an accurate valuation and, therefore, build a sales pitch that will convince potential buyers. For example, if your high growth business is under a year old, you might require more time in order to progress towards a mature stage, while businesses that are already in their mature stage could require diversification if its value is to increase and its appeal is to extend to a wider pool of buyers.
Is The Time Of Year Right For Selling Your Business?
When you’re timing your business sale, its seasonality shouldn’t be overlooked. For example, if you consider e-commerce enterprises, most notice a significant increase in sales around the busier shopping period from October to January. In the case of some e-commerce websites, this may account for more than half of the company’s annual revenue.
While it may feel natural to sell your business right after this especially lucrative time of year, however, it’s important to consider whether any buyer would be interested in acquiring the company in February but having to wait for 8 months until real returns start to come in. This would have a material impact on how much the buyer would be willing to pay for the company.
With this in mind, timing your exit around lucrative periods is vital.
Is It The Right Choice For Your Business?
Timing is essential to successful sales. There are numerous factors that come into play and, therefore, you need to make sure that you don’t just sell for the right reason, but that you sell at the right time too. Selling your business under duress or too quickly is almost certainly going to end up getting you a low sale price. In general, the longer you’re able to keep your business, the better the chances of your business having a fully-developed exit plan, and the greater the value you can achieve when you sell it.
When it comes to timing your business exit, it’s important to take professional advice. The Corporate Business Solutions team is on hand to answer your questions and help you to draw up an effective strategy for the long-term.