When Is The Best Time To Sell Your Business?

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1. When sales and profits have been increasing.  Nothing speaks louder than success.  When buyers see an upward pattern, they are inclined to believe all is well with the world and will pay a premium price for the business.  

2. When your employee base is stable with as many long-term, happy and loyal employees in place.  This will reassure the buyer that he or she is inheriting a solid workforce to provide them with technical support in running the business.  

3. When your outstanding accounts receivables average 30 days or less.  This has two advantages.  It gives the prospective buyer the impression that your clients are financially solid and satisfied with your products and/or services.  Additionally, if accounts receivables are part of the purchase price, it is unlikely that they will be discounted.  Thus, you will receive dollar for dollar at closing.  

4. When your accounts payables are less than 30 days old.  This will reassure the prospective buyer that you are paying your obligations in a timely manner and vendor relationships have not been damaged.  It is most important for a buyer to inherit existing vendors so they can receive similar credit and not have to be on a COD basis.  

5. When your equipment is in the finest working condition.  Make sure you can show when the last time maintenance or repair work was done on each piece of major equipment.  Point out if you have been using a preventative maintenance program to keep all equipment in top notch order.  

6. When your entire inventory is fresh and not out of date, stale or obsolete.  Sell off or dispose of any inventory that is not up to par, since you do not want “bad eggs” to surface during a physical inventory prior to closing.  You can jeopardize a business sale by making the buyer suspicious when he or she finds unacceptable inventory items that cannot be sold or contributed.  

7. When all your tax returns have been filed timely and correctly.  If a buyer has to wait for you to file a tax return that could have or should have been filed many months ago, you will create ill will unnecessarily and cause red flags to surface.  Make certain that sales tax, property tax, income tax, withholding tax, unemployment tax, etc. have all been completed and submitted on time.  

8. When other investments don’t look quite as attractive as owning a business.  If you see that the stock market has declined 20% during 2011, there are many individuals who now see business ownership as a superior “investment” to other types of investments.  

9. When long-term capital gains rates are favorable.  Many business owners are trying to have their businesses sold by December 31, 2011, since the long-term capital gains rate is 15%.  If it were to become 28% during 2012, a $1 million dollar business sale would leave the owner with $130,000 less in his/her pockets.  

10. When you still have enthusiasm for the business.  If a prospective buyer sees you as a burned out and unenthusiastic owner, they will find it hard to get excited with the prospects of owning a business that ran you down so low.  You want to be able to “sell” the buyer on the business with as much energy as possible.  

11. When you have a good reason for selling.  Good reasons are retirement, health reasons, relocation, aging parents, birth of a child, the commute has become excessively long, other business interests, divorce, partnership split, etc.  Bad reasons are the business is losing money, I can’t stay current with my rent, I am under-capitalized. I spent all my money on build-out and have nothing left for marketing, I am burned out, the business takes more time than I thought it would, I lost a major customer, a major supplier went bankrupt, etc.  
  • Author: Loren Schmerler
  • Title: Business Broker - Owner
  • Company: Bottom Line Management, Inc.
  • Company Website: http://www.botline.com/
  • Date: June 22, 2016
  • Category: Buying a Franchise or Business
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