No one wants to hang the 'going out of business' sign up.
Your business is likely the result of many years of your hard work. But selling isn’t necessarily admitting failure. In fact, knowing when the best time to sell your business, whether it’s profitable or doing poorly, is actually smart business.
Don’t be like many business owners who tend to hang on to their businesses for too long.
Here are five ways to know when it’s time to sell your business:
1. Your business is performing poorly
Debt is the key factor here. Is your business falling deeper into debt each month? If you are borrowing money constantly to keep your business afloat, it’s time to seek other alternatives.
In most businesses, when the current liabilities become more than 200% of current assets, it is too difficult to recover.
However, finding a buyer with resources who can inject cash flow into the business could be just what it needs to sustain life.
Merging with a larger company or selling to a strategic buyer could solve your staffing, funding and inventory issues.
Don’t delay until the decision is made for you by allowing the business to run out of money and collapse.
As serial entrepreneur and founder of Gilt Kevin Ryan told Forbes:
“If your company is not getting the traction it needs to be really successful, the faster you can move on, the better for everyone involved.”
2. Your passion for the business is starting to fade
If you have been successful in the past, but could use new ideas to keep the business flourishing, it could be time to sell. Don’t wait until you start to hate your job to move on.
Ask yourself these five questions to see if your dream has become more of a burden:
- Am I passionate about this business?
- Is there something else I would rather be doing?
- Am I working more than I would like?
- Is my business model flawed?
- Do I simply need a vacation?
Based on your answers, you should be able to determine your next steps, whether that’s just taking a short break, restructuring your company so you have more help or selling to someone else.
3. You have a compelling reason to sell
Sometimes situations such as divorce, death or the dissolution of a partnership can force an involuntary sale. In these cases, you’ll need to do what you can to make the best of a bad situation.
4. You receive an offer you can’t refuse
You may not have been planning to sell your business, but the offer is so good that you simply cannot ignore it. Take the time to do your due diligence and make sure the deal is as good as it seems.
5. Your business is profitable
Buyers will be attracted to consistently upward profit and sales trends, especially for at least three years. If the valuation of your business is high, it could be a good time to cash out.
Deciding to sell your company is a very big deal, and the process typically doesn’t happen quickly. It usually takes between six months and a year to sell a business, so start planning for the deal much earlier.
A lot of entrepreneurs have a hard time letting go and moving on from owning their business. Only you can decide for yourself whether the time to do so is now.
Ready to sell? You are just 10 minutes away from advertising your business to 1.3 million prospective buyers. Sell your business today.