This is a common and understandable question I receive from business owners. The answer is both objective and subjective. Let’s dive in and see if I can help you determine when is (or will be) the right time for you. There are five questions to consider.
Is Your Business Revenue and Profit on an Upward Trend?
Potential buyers want to see a healthy business as they consider taking over. The heartbeat of a business is revenue and profit growth. If your business has been growing year over year in both categories for three years, then your business is ready to sell according to this indicator.
Is the Estimated Exit Value of Your Business What You Want It to Be?
Your business is only worth what someone is willing to pay for it, but you can get an idea of the value of your business from an independent business valuation expert. A business valuation will cost you $2,500 to $5,000 depending on the complexity of your business. You’ll need to go through this step after you formally start to exit your business.
However, you can get a rough estimate of the value of your business by investigating what other businesses like yours have sold for, asking a trade association for input or consulting with an independent business exit coach.
Note: please don’t ask a business broker for an estimate. Business brokers will tell you what they think you want to hear to sign you up for their services. They are not reliable.
Once you know the estimated sale value of your business, you can determine if this value is what you want and proceed. If the current value is acceptable to you, then you are ready to start the formal exit journey.
Read, How Much Is My Business Worth?
Is Your Business Organized So Someone Else Can Run It?
By “organized” I mean are your books and records current? Are your systems updated and documented? Do you have current job descriptions for employees? Are your contracts current? Can you locate your lease documents? Are your insurance policies up to date?
A potential buyer wants to be able to step in and continue operating your business with as little disruption as possible. Look at your business from a potential buyer’s perspective. Can you provide all the information she needs to evaluate it in a day? If the answer is “yes,” you’re ready to exit; if not, then you have more work to do.
Are You Still Motivated to Own Your Business?
If you’re still motivated to own and run your business, then you’re not ready to exit it. The reasons for hanging on to your business can be emotional, practical, financial or a combination of these. For example, if you still have your identity tied up in the business, if you ‘ll regret exiting for whatever reason, or if you’re attached in some other way, then you’re not ready.
Be honest with yourself in answering this question. Your happiness, health and self-worth are at stake and it’s almost as bad selling a business too soon as waiting too long to exit. Only you can answer this question so let’s be honest, are you ready to step away?
Do You Have a Clear Idea of What Is Next for You?
This is a key point Julie Keyes, a colleague and wonderful and experienced business exit coach, stresses. I agree with her and the field of positive psychology supports the need to have a clear and vivid picture of the future to make a change. You need to have a specific idea of what your life will be like when you’re no longer connected to your business to exit it effectively. If you can’t wait to start the next phase of your life, if you would start on the next steps tomorrow if you could, then you’re ready.
Conclusion
If you can answer “yes” to these five questions, you’re probably ready to sell your business now. If not, then you have some work to do to get ready to exit your business. To get ready, reflect on each of these questions and determine what you would need to change to answer a resounding “YES!” Ask for help if you need it but get started now.
Questions for You:
Are there any other questions you believe a business owner should ask herself before starting the process to exit a business? How would you rank the questions in terms of what’s most important to you? Please make a comment below or ask me a question about the five questions – or any other aspect of a business exit – and I’m happy to answer. Thank you.
