A business owner posed this question the other day, and it is a question that is doubtless playing on the consciousness of many. In fact, it is an oft-asked question, and one with only one really logical answer when you think about it:
Yes. Now is the perfect time to sell.
I am sure that there are many out there who would opine conversely, that despite an improvement in business conditions and sentiment, it could well be better to hold off for the forseeable future (or at least until the end of the financial year). Delaying further would, from this perspective, allow the business time to potentially book a better profit, shore up the balance sheet further and perhaps multiples will have risen, giving a further boost to valuation.
Unfortunately – as far as I am aware, anyway – there is no crystal ball that can predict with any certainty such a set of future circumstances. Pegging one’s hopes on the unknown is evidently folly. Another market correction could be imminent, the company could lose a major client, key people could set up in competition. Any number of variables are in play and the only knowledge that we can rely on with any certainty is that which has already occurred.
So, back to the original question: “is now a good time to sell my business”?
The first clue to the affirmative is that the question is being asked at all. That a business owner is openly contemplating a sale is a strong indication that action must be taken, and quickly. The litany of failed exits that can be traced back to procrastination and a lack of definite action is extensive, and in many cases is the worst error a business owner can make. When an entrepreneur starts thinking about the exit, their energy is no longer fully focused on the growth and viability of the underlying business. This energy diversion leaves a void in the business, which either requires fulfilment from other sources (i.e. other people, perhaps management or an external buyer) or saps energy from the business to find the balance once more. So you’re left with a decision to fully commit for a longer period or to find someone else who wants to do just that.
The second consideration is the state of the market, as it is right now. We can look back over the past five years and see growth and stagnation throughout the post-GFC period, but who could have predicted with any certainty each peak or trough? Looking ahead, the future remains shrouded in a haze of uncertainty, and who is to say that today’s buoyant conditions won’t tail off in the next month? Or next week? Russia’s invasion of Ukraine has certainly given global markets the jitters, and it would be a brave person who would predict if and when these will end, and what the flow-on effects will be (and for how long).
What we can say is, right now, today is as good a day as any to make the decision to sell a business, or at the very least to start the process of getting it sale-ready. We know for certain that holding off will only mean that more Baby Boomer-owned opportunities (all competing for the same buyer pool) will hit the market, you will be older and closer to retirement and the cost of living will have increased even more!
Today you know with some certainty what your upside is, and you know what your risks are. We know who is wanting to buy and what they are looking for. We know what the government’s myriad rules are and how transactions are best structured to suit the situation.
Tomorrow? That’s a mystery.