The time comes in every business owner’s journey when it is time to sell your business and move on. How do you know when that is? The first step is that you need to ask yourself some questions and decide how those answers will affect your decision.
Before that, though, you should take some steps to make sure your business is ready to sell. Do you have everything in place? Are your books up to date? How about any software, or the technology you use in your business? Do you know how much your business is actually worth?
Once you can answer those questions, you can look for these signs that it is time to sell your business. Here are a few common ones, and what they really mean.
Many entrepreneurs get a startup high, but then often don’t relish the idea of the day to day operations. Once the business is up and running, the challenge of “making it” is gone, and the task of running a business begins.
The thing to remember is that the same skills that make you a great entrepreneur and startup person don’t always make you the greatest manager. Your boredom can also translate to frustration and poor employee relations. Your expectations must change with the business too, and the initial fear of failure is pretty much gone at this point.
For someone with this mindset, once you are bored, it is probably a good time to sell your business and move on to something that is more exciting.
A word of caution here though: be sure you are in a position to make money from the sale. You may need to work your business a little longer or hire someone to manage it for you until you are sure you can make your investment back and then some.
You’ve Grown as Much as You Can
Sometimes, in order to get a business to grow more, you need a fresh perspective. There are times when you have grown the business as much as you and your resources will allow. While you can see the potential for more growth, you may need more working capital or even just a larger infrastructure.
This is often when selling to another, larger company makes sense. A merger or acquisition might be appropriate, or an investment from venture capitalists or a private equity group will work. They will bring with them cash, new infrastructure, and sometimes the opportunity to expand your reach in a given industry.
Often in these cases, you may be asked to stay on for a while to manage the business or at least oversee the transition to new ownership. In the case of private equity funding, you may even retain a share of interest in the business and get additional money when those investors make an exit.
No matter what exit strategy you choose, when you have grown your business as much as you can, it may be time to sell.
You Need New Skills to Continue
Every industry continues to grow and change, and developments like AI, business process automation, and the development of smart ERP and CRM systems mean that technology will impact nearly every business sooner rather than later.
This means that to continue in business ownership, you will need to develop new skills and learn new technology. Your industry may get to the point where you don’t want to acquire those new skills and want to move on.
If this new technology and these new skills seem like too much for you to handle, it’s probably time to sell your business.
You Want to Retire
Retirement to many small business owners may seem like a dream, but if you plan it well, the sale of your business can be a huge boost to your retirement income and planning. There are a number of ways to sell your business and achieve this.
Often you may be selling to a family member or even be arranging a management buyout. What this means is that you, the owner, may be carrying some of the financing. This can be a source of steady income for you, and you can charge the buyer interest, making sure that your money is still working for you.
You can also sell for cash, and invest that money into an IRA, real estate, or other investments that can balloon your retirement funds, providing for your needs (and even wants) for years to come. The right investment strategy will also help you avoid a large tax bill all at once.
If you’re ready to retire, selling your business really makes sense.
If you are looking to move, it is important to understand that running a business from a distance can be difficult. Maybe you have a manager who you really trust and even a great team. Still, challenges can arise that make your in-person attention necessary.
While modern technology does make it possible for you to overcome these challenges, doing so can offer its own stress. It is often easier to sell your business and either buy another one or start another similar business in the city you are moving to.
You’re Interested in a Different Industry
As we grow and change as people, so do our passions and the things we like to do. This may mean you suddenly have an interest in a different industry altogether. There is nothing wrong with that: new industries are born all the time.
It is possible to own more than one business in more than one industry, but often the burden of learning a new one, and all the specifics that go along with that can be stressful. This makes being successful in both difficult at best. Divided attention often means too many hours and too little focus to make the best decisions.
If you’re interested in developing a business in a new industry, it is probably time to sell the one you own now and move on.
Your IPO was Successful
Why does this mean it is time to sell your business? Often this is a time of extreme growth and new challenges. Your board will now answer to shareholders, and this can change the way you as a company function. This takes a lot of adjustment, and while this is a great outcome, it also comes with challenges.
Often those challenges mean a shift in management style, risk management, and more. For your company to continue to be successful, you will need help from new members of your team.
Even if you have the best of outcomes, and your IPO is a success, it may be time to deploy your exit strategy, sell, and move on to something else.
Whatever your reason, there may be a time when it is right to sell your business. These are just a few examples of what that timing might look like. In the end, it will depend on your situation and your instincts.
When did you know it was time to sell your business? Let us know in the comments below.