How do you know it's time to sell your business?
Starting a business is exciting, and through years of hard work it becomes an extension of your family — often called your "baby." Over time, your attention shifts from growing a profitable business toward monetizing and realizing the value you have created. Coming to grips with the emotions and your own mortality takes time, but selling a business can be a highly rewarding personal experience.
Why do owners decide to sell?
- Illness — according to Inc. Magazine, the number one reason owners sell
- Time for a change — sometimes the business simply isn't fun anymore
- A graceful exit — to pursue retirement dreams after a lifetime of work
- Peak liquidity — capturing value when the opportunity is highest
A profitable business holds tremendous "paper value," but it is never truly realized until you sell. For most owners the business is the single largest asset after their home, so keeping that much net worth tied up in an illiquid asset may no longer suit your risk profile as you age — a conversation to have with your financial planner.
Preparing for a successful sale
Preparation is rarely as straightforward as it seems, and depending on your industry, market and legal structure there is much to ready before a sale. Engage your financial planner, accountant, lawyer and tax advisor as early as possible, because most owners sell only once and the stakes are high.
Choosing the right advisor by business size
- Business brokers — local, simpler, owner-operated "Main Street" businesses with revenue under $3 million
- M&A advisors — profitable lower-middle-market businesses too sophisticated for a broker and too small for an investment bank
- Investment bankers — larger, complex national or multinational businesses with revenue over $50 million
Key facts: is it time to sell your business?
Top reasons to sell: illness (Inc.'s number one), a desire for change, a graceful exit, peak liquidity
Paper value is realized only at sale; the business is usually the largest asset after a home
Engage a planner, accountant, lawyer and tax advisor early — most owners sell only once
Advisor by size: brokers (under $3M), M&A advisors (lower middle market), investment bankers (over $50M)
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax or financial advice. Consult qualified advisors regarding your specific circumstances.
