InSight

Exit and Growth Strategies for Middle Market Businesses

The Best Time To Sell Your Business

By Jim Zipursky | May 10, 2008

Business owners considering a sale of their business often ask us, “When is the best time to sell my company?” It is a fundamental and age-old question.

Sellers always want to “time” the sale of their businesses to maximize their return, either through a higher price, lower taxes, or, hopefully as we have seen in the last eight years, a combination of both.

Since President Bush lowered the Federal tax on long-term capital gains to 15%, there has never been a better time to sell a business, at least in terms of tax implications. Combine low tax rates with a very strong economy, and you know why M&A deals were so predominant from 2004 through the first part of 2007.

Will taxes go up in 2009? Mr. Obama and Mrs. Clinton have both promised, if elected, to raise taxes on long-term capital gains to 28% or 25%, respectively. However, this is a promise, not a guarantee.

Will the economy go up or down in 2009? Our crystal ball is no clearer than yours.

When is the right time to sell your business? Certainly, there are market conditions that make it difficult to sell a business, but two maxims of the M&A industry are always proven true:

1. A good company with good profits and good people in an industry of interest to buyers will always sell for a fair price regardless of the economy, and;

2. The best time to sell a business is when you are ready to sell, never before.

#2 says it all, doesn’t it?


One Response to “The Best Time To Sell Your Business”

  1. You’re right of course – but lots of businesess have to sell before then. Perhaps conditions in their markets – a move to consolidate for example, dictate an earlier sale than had been planned for. Also research in the UK suggests that up to a quarter of SME sales occur just because someone approached with a good offer – i.e. they hadn’t been prepared. Moral of the tale must be to always have the exit in mind, and be grooming the company to maximise value, even if its not on your short term agenda.

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