InSight

Exit and Growth Strategies for Middle Market Businesses

Getting the Moons to Line Up – When is the Right Time to Sell?

By Dan Vermeire | Dec 17, 2013

moonsBusiness owners often ask us “When is the right time to sell?”  To answer, we need to look at the question in several parts.  When is the right time… For the economy?  For the financial markets?  For your industry?  For your business?  And for you? When will all these moons line up?  Maybe right now.

Economy – May Be Hard to Believe, but We’re Back

It is always better to sell into a good economy.  If you look at any current measurement – housing, GDP, manufacturing, employment, or others – you’ll see that the US economy is now back to pre-recession levels.  But, the glacial-speed recovery has taken 5 years, rather than 2 years of previous recessions, so we’re a bit numb.  Most businesses are now reasonably healthy and have growth prospects – an indicator of a good time to sell.

Financial Markets – Buyers Have Cash and Interest Rates are Low

Right now, buyers are more aggressive than ever, with corporate America and equity groups flush with cash.  What’s more, lenders are also aggressive, with low interest rates, and lending helps fuel the transaction flow.  Financial markets are extremely favorable for M&A deals right now.  But for how long?

Your Industry – Any Big Changes?

Most industries are back to reasonable health now, like the economy overall.  Normally, that’s a good time to sell.  But if your industry has new disruptive technologies, new business models, new foreign or competitive gorillas, then it may be time to re-tool your model, move up the food-chain, or sell to a strategic buyer.

Your Business – a Tight Ship?

At a strategic level, look objectively at how your business is performing, relative to your industry, your past performance, and your future growth prospects.  At an operations level, are you running a tight ship?  How do you run your books, inventory, AR, HR, marketing and management?  If there’s room for improvement, don’t be shy about asking for help.  Fixing things up may help your valuation, while other things may take too long, or not be worth it.  Consider the value from “the eyes of a buyer.”

For You and Your Family – It’s Really a Personal Decision

If you can check off the four items above (and today, most businesses can), then the final item is really a personal decision.  Is this the right time for you and your family?   In some cases, it is the right time – time to retire, time for a change, or time to take your money out.

But there are many other types of transactions, that are not based on selling and leaving.  Rather, they are to join with a financial partner, get focused, and grow the business further – using other people’s money, as part of a bigger family.  Either way, it’s still a personal decision.  But it is well worth your time to talk to a professional and learn about the transaction options and what they would mean to you.

Posted by Dan Vermeire.

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