There are many factors that motivate the decision to sell your business and many of these are out of your control such as health concerns, a new strategic path, stress or a need to liquidate assets.
Whatever your reason for selling, the price at which you sell your business is largely influenced by the timing.
Before you put a small business on the market you need to consider that the sale price of a business usually reflects its past profit & performance
External economic factors within South Africa may also affect your selling price. Consider external and local financial performance, including specific events that will directly impact your business.
Following declining profits and performance
This can be an emotional and difficult time for an entrepreneur. You may notice a drop in performance that has depleted your motivation and energy, and you no longer have the strength and determination to rebuild the business
Unfortunately, this is often the case with distressed business owners. Unfortunately, if your business is not profitable and performance is down, you will get a lower sales price. If your business is struggling, ask yourself if you can keep it going and increase profits to get a better selling price in the future.
Perhaps an unforeseen competitive threat means you are unlikely to recover. In this case, you need to objectively assess how likely it is that you can return the business to its former success, or risk it deteriorating further.
If the level of performance continues with slight fluctuations in profits
The selling price of a business may be based on average profits over the last three to five years. A potential buyer can see that the company has performed consistently over an extended period of time. Once your “For Sale” sign is up, keep the momentum going and do not become complacent.
The sales process can take a while. You do not want to squander your price advantage before closing by getting carried away and taking your foot off the gas pedal.
Even if your business does not go as planned, you need to keep it going until you have handed the keys over to the new owner. Buyers want to see what the future of the business can look like, so they’ll want to see a working business.
Increasing performance and profits
An established, growing business will always sell more quickly at a high price because savvy investors are ready to profit from future market success.
But why would you want to sell your business when it’s booming? You have the opportunity to enjoy your success and the hard-earned fruits of your labor.
With buyers paying large amounts of money for increasing profits, a period of growth and profitability is an important time to come clean with yourself: Why do you love owning and running your business? Would you be as motivated if you were facing declining profits? Will you sustain that growth and profitability? What are the pros and cons of selling at the best time?
You no longer enjoy your business
When you started your business, you were motivated by entrepreneurial challenges. Now that your business is established, those challenges may become common tasks that no longer interest you. If you no longer have any incentive, it may be time to prepare for your exit.
Your business has outgrown your capabilities
This is a difficult reality. Ownership and leadership require humility and acceptance. Perhaps someone with new and advanced skills can take your business to the next level. If you can no longer muster the skills and energy your business needs to evolve, consider selling it to someone who can.
Threats on the horizon
Threats that impact your bottom line and performance are always looming. Perhaps you own a boutique hotel and have noticed that Airbnb is attracting your customers. Think about your local video stores that are constantly being squeezed by streaming giants like Netflix. You need to stay abreast of these trends in South Africa to anticipate the future of your sector. Consider the impact of potential infrastructural changes around your location.
A lucrative opportunity
A business exit strategy can also be motivated by an opportunity. Perhaps you are a profitable, innovative social media site that has caught the attention of Facebook. You are offered a multi-million rand acquisition. You have probably worked hard to build your brand, but a company like Facebook has the resources and manpower to take your business to the next level. An offer like this may be worth considering.
Regardless of the reason you are looking to sell, having an exit strategy and preparing your business for sale means you’ll be ready for whatever situation is on the horizon. So let us talk about whether you should seek professional help or take the process into your own hands.