I often get asked: ‘when is the right time to sell my business and how do I know?’
As ever, with such important decisions the answer is not straightforward, and while you might be a key player in the decision-making process you almost certainly won’t be alone in deciding whether to sell.
There will typically be numerous other stakeholders to satisfy from your own side, each with their own perspective on any deal.
First thing to say is beware; while these stakeholders may not be significant in terms of shareholdings they can have a huge influence on whether a deal goes ahead and unless they are reasonably satisfied they may scupper an otherwise successful deal.
Timing is an important consideration here as some in your business may want to keep going and continue to grow the business while others want out now.
The most obvious potential conflict will be between the business shareholders and senior management who actually run the business.
Another conflict may be between different shareholders, with some wanting a bigger slice of the pie and willing to stop the deal if they don’t increase their value.
A word of warning when setting out on a new business venture is to get in place effective ‘drag along’ and ‘tag along’ clauses as this will be vital when you come to sell.
It is by no means impossible, but the message is to make sure that all important stakeholders are looked after when putting a deal together as buyers will be very sensitive to unhappiness in the target purchase.
Another vital component to think about, and high up as a priority, is to think: ‘is my business in good shape for a sale and is it going to be attractive to prospective buyers or is there work to be done first?’
If there is work to be done then the first thing is to make any changes that may be needed to increase the marketability and therefore the price that can be achieved.
You might have to delay your sale, and quite significantly, while you make these, sometimes difficult and costly changes, but you really don’t want to be involved at the wrong end in what will be a fire sale otherwise.
The final point on this is to make sure your management information is comprehensive and up to date as during the due diligence process you will need to validate your claims.
The other, perhaps most important and obvious thing that makes complete sense is to sell when the market is hot with a lot of buyers looking around with wallets full of money to spend.
Obviously market conditions like this are ideal and you really should consider striking a deal now, if you can, as these buoyant conditions will not last forever and there are many instances where people regret not having taken the opportunity to sell when it was there.
