InSight

Exit and Growth Strategies for Middle Market Businesses

5 Reasons the Timing is Right to Sell Your Business Now | Part 5

By Brian Ballo | Apr 16, 2014

Time to sell your businessThis blog post is the last in a series of 5.

Business owners inquiring whether the timing is optimal for obtaining the highest price for their business, often start by inquiring: “What are business valuations in the market today?” EBITDA multiples provide a quick thumbnail answer to this question.

However, just focusing on today’s industry numbers, does not enable a business owner to evaluate the risk of whether the business will be worth more or less in the future, as compared to selling the business now.

Savvy business owners, who are attuned  to macro factors impacting business valuations, such as the aging population, financing terms and tax reasons, understand  that several conditions  exist today, which support selling your business in 2014.   In addition to  these  macro factors, the  question  of timing comes down to whether selling the business is strategically beneficial for the business, given its life-stage, as well as compelling personal reasons why it makes good sense for the business owner to sell.

5.  As an Owner, You Have Compelling Personal Reasons to Sell

Despite macro trends that support the case for selling the business, the emotional bonds of an owner to his business can be strong. In American culture, being an owner is an important part of how we define ourselves, part of our self-image. Ownership provides a general sense of self-esteem, pride, and a feeling of control. As a result, for many owners, their business and social lives are interwoven, making letting go of the business, all the more difficult.

With work-outs common, the owner will often have to adjust to the more restrictive responsibilities of being an employee of the new owner. If the owner sells the business, some family members may be disappointed that the business will not remain in the family, especially if they had expectations of buying or inheriting the business.  Thus, owners should consider the likely impact of selling not only on their lifestyle, but on the lifestyles of other family members as well.

However, businesses are in business to make money, and smart business owners view their companies primarily as assets.  With the right investment and tax planning, the proceeds from the sale of the business can be utilized to achieve retirement goals, and distributed to heirs pursuant to properly structured trusts.

So, with macro conditions pointing towards selling now, do compelling personal reasons also exist for a transition to “life after sale”? Once you seek professional advice from your investment banker, wealth manager, attorney and accountant, then you, your spouse, and your family, will be better prepared to decide if the timing is now right to sell your business.

Posted by Brian Ballo.

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