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Knowing When to Sell Your Business

By: Garry Crystal - Updated: 24 Aug 2010 | comments*Discuss
 
Knowing When To Sell Your Business

Knowing when to sell your business may not always be as straightforward as it seems. There are a number of different scenarios that may occur that can lead to selling up. Having an exit strategy in place should help when it comes time to sell up as well as keeping a close watch on your own market.

Reasons for Selling

Many people sell their businesses for reasons other than the most favourable of being offered a great price. Reasons to sell can include retirement, ill health, dissolving a partnership, the business is no longer a viable option or you simply no longer wish to continue running the company. Planning an exit strategy in advance is always a wise option regardless of the reason for selling. The key to a successful sale is knowing when to quit, especially if your business is struggling to make a profit.

Failing Businesses

There are also a number of reasons why a business might fail and hopefully the entrepreneur can learn from the failures. Around 27% of businesses fail within the first six years of trading due to a lack of financial awareness. Basic skills such as accounting and book keeping are major reasons why many businesses either fail or are sold. These are mistakes that are easily rectifiable and help is available from a number of sources for those lacking these vital financial skills.

Make Rational Decisions

Selling up a company is not an on the spot decision. Careful consideration should be given on all aspects and this can be a stressful time, especially for owners who have invested a lot of time and effort building up their company. Preparations will need to be made, and in some cases this can start as far back as two or three years before the sale is actually concluded. Preparing well in advance will give you a chance to make your company look more attractive to potential buyers, and hopefully achieve a respectable sale.

Points to Consider

If you are considering selling your company and are preparing well in advance there are a few measure you can take to make your company look more enticing to buyers. These measures should include:
  • Reducing your operating costs without having to cut back on vital expenditure
  • Reducing your surplus stock to improve your level of working capital
  • Make sure that all equipment, machinery and other assets are well maintained
  • Always try to include all machinery and assets as part of the sale
  • If employees are to be classed as assets in the sale then make sure that they know exactly what is being planned

Watch Your Market

Keeping a close eye on your market should ensure that you sell at the right time. You may have become aware that your company is no longer trading at its optimum level. If you have noticed this then it could be down to either industry trends, a downturn in the economy or the product or service you provide is now no longer required. It may be that you can ride out the storm but in some cases the best thing to do will be to sell up quickly before any more money is lost. If you cannot make a good living from your endeavour then selling up will be the best route to take.

Your Competitors

When larger competitors move into the area it often spells the end for the smaller businesses. Again, this is not always the case but larger competitors can usually provide cheaper products and services than the smaller business. In some cases, small businesses will try to undercut larger competitors and this will usually not be a good idea. A price war with large competitors is the last thing a small business needs. Larger competitors will have the resources to weather a price war. The best case scenario may be to sell your company as soon as profits start to deteriorate due to larger competitors.

It is often the case that selling up feels like the end but it can be regarded as a new beginning. It will give entrepreneurs a chance to rethink their options and in some cases start new businesses. Hopefully the sale will provide some cash that can be invested into a new venture. If retirement is the reason for the sale then hopefully the money will be enough to allow you to comfortably enjoy your retirement years. Anyone who has struggled to keep a business afloat will not doubt feel a weight lifted from their shoulders when the sale does go through, and it can be a liberating experience.

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