Deciding when to sell your business is one of the hardest decisions you will make as a business owner. Sadly during the current COVID pandemic, your hand may be forced to sell or worse liquidate!
Regardless if the motivation to sell your business is based on pandemics, divorce, boredom or an approach by a buyer the timing of your sale can really influence the price. The sale price typically reflects past performance and profits, however, buyers in this current climate will be hesitant to base any purchase offer based on historical profitability. They will be looking to see if the business will be viable post-pandemic. Any concerns will result in considerably low offers!
Which category does your business fall into?
1. Declining Profits
This is the most challenging time for a business owner. If your business had declined rapidly you need to ask if you can keep it running and increase profits, ensuring a better sale price in the future. You need to objectively assess the likelihood of restoring the business.
2. Sustained performance levels with a slight profit variation
A business sale price can be based on the previous 3 – 5 years average profits. Buyers want to see consistency. You may not be 100% committed to selling if in this position but you do wish to explore the price you may get for the business. Don’t shout “my business is up for sale” too prematurely. Buyers often offer significantly lower asking price if they are aware the business has been on the market for a long period of time (even if you’ve not been seriously considering a sale).
3. Rising performance and climbing profits
Unlikely in this current climate – unless you selling face masks or hand sanitiser!
A growth business will always sell quickly and at a better price. Most owners don’t want to sell when a business is prosperous however this is always a time to check in with yourself and ask – why do I love owning and running this business? If you don’t and it’s the financial return you love then it may be wise to look at cashing in now – if the business takes a downturn or need more of your time it could quickly become a burden.
4. Your business has outgrown your skillset
This is a tough one to acknowledge but is it time to sell your business to someone who can take it to the next level?
5. A lucrative opportunity
A business owners exit strategy can also be motivated by opportunity. You may want to be a multi-million-pound business but do you have the skills to get to that level? If not consider selling and cash in.
Parker Arrenberg Solicitors can advise and assist you sell or buy a business. Check out the sale/purchase process page here.
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