You’ve likely seen a lot of advice on starting a new business or venture. But when it comes to knowing when to sell your business, there’s much less specific guidance on the “whens” and “hows.”
That’s somewhat understandable. Businesses can vary widely. An independent retailer, for example, has needs, goals, and challenges that can be quite different from a technology consulting firm. As such, there could be a million reasons either business would want to cash out.
Given that, how do you know when to sell your business, beyond just a gut feeling? In the case of a Legacy Business, which you’ve ideally created with the end in mind, there are a number of factors that can influence your decision. Personal desire, the state of the market and, most importantly, where you are on your Profit Pathway all need consideration.
So are you ready to make a move yet? The answer may be “yes” if any of the following is true:
Sign #1: You’ve lost passion.
Are you having a hard time getting up in the morning to grow your business? If motivation is lacking, perhaps because the grass is greener elsewhere, it may be time to seek out a buyer who may be interested in overtaking your venture.
Sign #2: The market has shifted.
Anyone who ran a car service in the mid 2000’s will recall the sudden financial impact they felt when Uber and Lyft disrupted the marketplace. If you see your marketplace changing because new technology is replacing a service or product you’re offering, you may need to re-evaluate your Profit Pathway while there’s still a measurable amount of value in your organization.
Sign #3: You no longer have the resources.
When you didn’t start with the end in mind, and you aren’t running your business based on what you learn in the Cash Flow Cure program, you may find yourself with scarce resources. And while every business experiences a slump or two, if you’re consistently struggling to keep your operation running while sinking further and further into debt, you may need to consider a way out.
Of course, before you jump, you should consider other alternatives. Taking on new partners who can help create cash flow or revamping your business model can jolt your business out of a slump. Case in point: Netflix was heading for the dumps when they decided to shift from a mail-order, DVD-rental service to a full-fledged on-demand entertainment network. Now Netflix is one of the most successful companies in the world and “Netflix and chill” is part of our every day vernacular.
Sign #4: You have an interested buyer.
Although it’s rare for small businesses, spontaneous sales do happen. If you’ve been approached by an individual or organization that wants to buy your business, but you’re not sure you’re quite ready to sell, hear them out. Do their values and vision match up with what you’ve created? Do they have a plan to create a smooth transition? Does what they’re offering match up to what your business is worth? If you need help negotiating, a financial coach or consultant can help.
Sign #5: You’ve reached the right spot in your Profit Pathway.
The goal for a Legacy Business is to be sold for a profit that fuels your Freedom Generator in a significant way. You can take out profit along the way, but generally you’re putting all your energy toward increasing the value of the business with an eye toward the eventual sale. If you’ve completed Module Two of Cash Flow Cure, you know your Profit Pathway. And you’ll know when you’ve reached the point where you can and should sell to meet your Profit Number.
For many entrepreneurs, selling a business that was created with passion and love is emotionally challenging. After putting months or years into labor of love, even if you planned to sell all along, letting go may feel impossible. That’s understandable, and you shouldn’t judge yourself for feeling attached. But selling your business is an important part of the process of moving forward—whether you’re moving toward Freedom or a more lucrative venture. So as you prepare to put your “baby” up for sale, try to remember the benefits of letting go—more time, Freedom and money.
image credit: Bigstock/Oneinchpunch