Watch for these signs to know it is time to sell a business

Hew Hallock, SLV DRG

Timing can determine success or failure in business. Understanding when the time is right to act – to move on or step away – and knowing the right time to sell a business is a good example of understanding the importance of timing. At some point, the “for sale” sign is going to go up.

“Right now there is an unprecedented amount of capital and loan dollars available to both purchase and lend to business opportunity,” noted Kevin Wilkins, executive director of San Luis Valley Development Group.

There are several apparent signs that indicate when it is time to sell a business:

“Once in a lifetime” offer

This is the offer that is going to come around only once, obviously. It might come from a larger company willing to offer a substantial amount for the business. Or, it may come from a competitor that wants to join your company with theirs and use your skills to build a better business.

Low motivation and burnout

Day-to-day management of a business can take a toll on enthusiasm. Managing employees, dealing with customers, and handling the constant flow of issues, big and small, that pop up can make it all feel too mundane.

“Coming off the stress of keeping the doors open and even growing a business through a pandemic and transformation changes caused by disruption might be a good time to cash out, take a break to contemplate your next entrepreneurial venture,” said Wilkins

When a business becomes a drag it is probably time to cash-out and look for something new that sparks a renewed passion.

Falling behind on business and industry trends

Services or products offered by a business can become obsolete. Larger or more aggressive companies can make it impossible to compete.

“Many businesses will be facing a ‘new normal’ that might cause some business owners to question whether they have energy or desire to re-invent themselves in order to keep up,” Wilkins said.

The creative business model developed when the business began becomes obsolete. When any of these happen, it is time to change or get out.

Business has peaked

“The strategy of most private equity investments is to sell at the peak of a growth curve. A sale can also inject new energy and ideas for a second growth curve,” according to Wilkins. When a business is doing really well is an ideal time to consider selling. At its peak, a business will have a high valuation which means a great return on investment. With its strong financials, buyers will be able to receive financing more easily. A successful business will also give buyers forward momentum to work with.

Professional goals change

When the reasons for going into business change or are realized, then it may be time to sell and find a new passion. Owning a business can be very different than first expected – not as exciting or fulfilling. Selling can provide the capital necessary to pursue a new interest.

Tragedy

Sad circumstances can necessitate a change. Death in a family or a divorces may force a sale or make it difficult to run a business a peak level. Selling under difficult circumstances can be alleviated somewhat with the professional help of a business broker. “In order to preserve a legacy of work, a business should always prepare for the inevitability of crisis or tragedy,” Wilkins said. ”Business is not insulated from life but benefits even more from good planning.”

Dreaming of retirement

At some point, the time to sell and retire will appear just right. The promises of retirement – freedom, time with family, travel – may become more attractive than running a business. When planning retirement occupies more time than tending to business, then it is time to begin planning a sale. Procrastination will only cause a loss of value of the business. When the decision to sell is made, begin preparing, almost immediately, for that important business transaction.

“The first thing sellers can do is get a true and honest value of what their business is worth. Getting an accurate valuation of your business is crucial to making sure that your exit is a successful one, and hopefully a profitable one as well,” advised Jason Medina of the San Luis Valley Small Business Development Center (SBDC) in Alamosa. ”No one wants to face retirement without making sure that you and your family have the resources you'll need to live comfortably.”

To help with planning, the Colorado Office of Economic Development and International Trade (OEDIT) has a division committed to helping owners find suitable options for succession planning. OEDIT can provide technical assistance in the form of a small grant, help with feasibility studies, assist in finding opportunities for loans, and provide continued support throughout the process.

Also, the SBDC can help with a succession planning template to make sure all aspects of the transition are well-planned. “This helps eliminate the risk of missing out on important decisions, ensuring a smooth transition, which is a benefit to both the seller and the buyer,” said Medina. “We can also aid in creating a new business plan for the successor, help find funding sources if needed, and continue to provide technical assistance and one-on-one consultation for whatever business topic they would like to

know more about.”

Those interested in exploring the sale of their business may contact Medina with the SLV-SBDC at (719) 589-0312, or go online to www.slv-sbdc.com.

Questions?

Contact us at 719-589-3681 or email AlamosaCountyChamber@gmail.com.