Running a business is a risky and difficult endeavor. Sometimes, however, the more difficult task faced by a founder is knowing when to sell the business and move on to something else. But when exactly is it a smart time to sell a business? Read on to find out.
While the business is ahead of its industry
A common saying is that the best time to quit is while you are ahead. If a founder is considering selling a business, then there is no better time to do this than when the business is doing better than its competition, making profits, and standing on a solid bed of value. Investors are more likely to take them seriously, and they can easily walk away from any offers that do not seem favorable.
From this advantageous position, it is much easier to negotiate prices and terms that are favorable to them as the founder of the business and to the rest of the team that helped them build it.
When the founder is no longer in tune with the business
Founders often start a business with a particular objective in mind. As they succeed and grow, the business can begin to develop in a direction that is out of line with the founder’s initial objective. When situations like this occur, founders can find themselves hard-pressed to keep running with the business and can get burned out mentally, emotionally and physically.
Rather than keep trying to make a difficult situation work, selling a business is an option that should be explored. That way, the founder gets rewarded for exiting the business gracefully and can make room for someone who can take it to the next level.
When the business no longer has enough capital to keep going
Capital is the lifeblood of every organization. Without sufficient capital, it is impossible for a business to meet its obligations and to grow to its full capacity. Unfortunately, the nature of most small businesses is such that capital is always in demand and in some cases, the capital which a business demands may far outstrip the available supply.
Facing such a situation, if a business owner is presented with an offer from an investor looking to buy a business, that owner would be wise to consider the offer as it would save the business the headache of having to file for bankruptcy.
When the business has hit the founder’s markers for success
While many business founders start and grow their businesses because they want to operate in an industry for an indefinite period, some founders start their businesses with the sole aim of making it successful and then selling it at a high price. For the founder who starts a business with that aim, the smartest time to sell the business would be when it has reached and surpassed the markers of success that the founder originally set for it.
Growing a business from the ground up is risky and difficult, and deserves to be well rewarded. For the founder wondering when the best time to make an exit and sell the business might be, the ideas above might be a good guide to use.