There comes a point when an entrepreneur like yourself considers selling their business. Whether it’s your goal from the start or brought about by circumstances, selling your business is a pragmatic move that should not be equated to quitting.
The motivation for selling a business differs for everybody. Some may feel the need to move on to better things, while others want to refocus their priorities in life. Whatever the reason, you must not take the matter lightly, as people’s livelihoods will be affected by your decision.
In this blog, we’ll discuss how to know when to sell your business and why you should hire a financial advisor to help you with the process.
How to Know When to Sell Your Business
Selling a business is a complex and emotional process. It’s essential to make this significant decision at the right time for the right reasons. Below are some key indicators of when to sell your business.
1. Your business is doing (or not doing) well
You’ve consistently hit your sales targets, established your industry position, and amassed a loyal customer base. While the obvious course of action is to keep growing your business, take this success as a sign to exit.
Any investor would hop on the opportunity to run a profitable business, especially if it has a unique and sustainable model. As such, this presents a golden opportunity to sell yours at a profit.
On the other hand, you should also consider selling your business if it’s not performing well or you’ve run out of ideas for further growth. It may flourish better under someone with more time, ideas, determination, and investment.
2. You’re getting ready to retire
Retirement is an inevitable part of life. It may require you to shift your priorities and change your lifestyle to enjoy the fruits of your labor and spend more time with your loved ones. As such, take this stage as a sign to sell your business, as you may not have the time, money, and energy to manage it anymore.
Ideally, this should have been laid out beforehand to ensure you are fully prepared for your golden years. Consult a financial advisor years before retirement to lay out a financial plan that maximizes your resources even after selling your business.
3. Your heart is no longer in it
Does running your business feel like routine work now? Have you been repeatedly dealing with the same problems? Do you no longer feel challenged? If your answer to these questions is “yes,” it’s a sign that you’re already bored with your business or industry.
This is completely normal if you’ve been at it for a while. But if you’ve done everything to reinvigorate the “spark” to no avail, then it may be time to let go and find other ventures.
4. Your business has outgrown you
Most entrepreneurs aim to grow their businesses fast. However, there may come a time when you’re content with its current level of profit and the pacing of your work, so you may deem that more growth will disrupt your current priorities.
While it isn’t inherently wrong, other stakeholders, such as your employees, managers, and co-owners, can and will push the business’s boundaries to grow. If your goals no longer align, it may be best to sell your company to those who see more value in your asset than you do.
5. You want to focus on other ventures
As market trends change, entrepreneurs inevitably shift their interests and develop more profitable businesses. If you’re now more focused on building your new venture, you may be better off selling your established business because it will be difficult juggling both.
Before jumping the gun, be honest and realistic when setting your priorities, as you may be selling an established and profitable venture over a volatile startup.
6. You’re getting serious offers from potential buyers
If your business has a unique offering and a strong model, you attract investors looking to enter the industry and grow their wealth. This interest is a clear sign that your company has value, and it may be a good time to consider selling. It may also indicate that the market is favorable, and you may be able to sell your business for a higher price.
However, you should carefully evaluate these offers to ensure they align with your financial goals and your business’s future.
7. You know that you’ll leave the business in good hands
Selling to a buyer who shares your vision and values and possesses the necessary expertise and resources to advance your business can be a strategic move to secure its future. You can feel relieved knowing your hard work and legacy will carry on, and the new owner will continue serving your employees, customers, and community well.
How a Financial Advisor Can Help You With Business Exit Planning
Fortunately, you don’t have to tackle the challenge of selling your business alone. Talking with your trusted financial advisor can help you get the most value out of the sale while ensuring that any loose financial ends will be tied up as you exit. Below are ways a financial advisor can help you with business exit planning.
Determines your business’s value
A financial advisor can analyze financial statements, market trends, and other factors to develop a realistic valuation of your business and set an appropriate asking price. The figure will be taken from different data points, such as the profit and loss ratio, a summary of assets, and remaining inventories.
Evaluates potential business exit routes
You can sell your business in many ways, such as through mergers and acquisitions, initial public offerings, and liquidations. A financial advisor can help you determine which exit route to take and how to navigate the intricacies of each method.
Ensures you meet your exit objectives and future financial goals
A financial advisor can ensure your exit goals align with your financial needs, including preparing for retirement or other milestones. Moreover, they can aid you with estate planning to guarantee that your business’s sale proceeds go to your family should you pass away before or during the exit.
Creates a tax strategy to minimize and delay obligations
Entrepreneurs must pay certain taxes like capital gains and sales after selling their company. A financial advisor can review your business structure and identify any tax liabilities arising from the sale to ensure that you are on the good side of the IRS.
Participates in drafting a smooth transition plan
A financial advisor can guide you in finding potential buyers and ensuring your employees are not left out in the open as you sell your business. They can also help you establish a timeline for completing transactions and transferring ownership.
Exit With Ease
Deciding when to sell your business can be daunting. However, with careful consideration and guidance, you can make informed decisions that align with your personal and financial goals. Working with a certified financial advisor can help you navigate the complexities of the sales process—from determining your business’s value to developing a tax strategy and transitioning ownership.
Look no further than Tencap Wealth Coaching for professional wealth coaches who can ensure your finances are in good hands.
Contact us today to learn more about our business exit planning services.
Greg Black, CFP®, ChFC®
Greg Black is the owner and founder of Tencap Wealth Coaching, an independent investment advisory firm founded on academic investing principles. As a Certified Financial Planner, Greg takes an educational approach to helping his clients be settled and responsible with their financial circumstances. Greg specializes in helping his clients create a proactive plan to minimize the exposure of market conditions while still harnessing the incredible power of global financial markets.
Greg specializes in "complexity" and is skilled at turning a complicated situation into an organized strategy for the families he serves. Greg, and each advisor of Tencap, is a stated fiduciary. You never have to wonder if your best interest is being served. Greg has been transforming the investor experience since 2012.