Best Time to Sell Your Company | Jordensky

In this blog post, we will provide an ultimate guide to selling your business, including expert tips and strategies

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You started your company from the ground up. You had an idea, a skill, or expertise that enabled you to succeed and create something you're proud of. You've given people jobs and helped them succeed, but you're getting a nagging feeling that it's time to move on.

In this day and age, the question "Should I sell my business?" is all too common. Many Baby Boomers started businesses over the years, and now many of those same people are looking to sell those businesses.

But it's not just Baby Boomers looking to sell their businesses. Many young entrepreneurs have taken their businesses as far as they can and are looking to exit gracefully.

It’s Time For a Change

Retirement

By far the most common reason for people wanting to sell their business is retirement. They reach a certain age and want to unwind. It's understandable that they'd want to take a break after decades of pouring their energy, resources, and time into building a company. These individuals, in particular are ready to retire and have no children who are eager to take over the business.

Instead of letting their legacy die, they decide to sell the company to someone who will oversee it and ensure the well-being of their employees.

The Serial Entrepreneur

It's also possible that the owner is simply seeking new opportunities. You’ll hear the words “serial entrepreneur” bandied about quite a bit in and for good reason – people often just want a change. They've gotten as far as they can with their current venture, and they have a new idea they'd like to test. After all, Elon Musk is best known for his work with Tesla, but he's also been known to gaze at the stars and burrow underground.

The point is that it's very common for someone to start a business, grow it, and then sell it before moving on to a new project. If you identify as this type of entrepreneur, please contact us to learn more about how we can assist you with your next business acquisition.

Relocation

Sometimes people just want a change of scenery. Perhaps they are tired of dealing with the cold or the weather is too hot. They may desire to relocate to a different economic environment and begin a new venture.

It's also common for business owners to relocate for family reasons. Maybe their spouse gets a great job opportunity in another state or their child gets accepted into a prestigious prep school.

Health Concerns

Changes in health can also be a strong motivator to sell a business. Often, business owners reach an age where they can no longer handle the physical labor. If there is no one available to pick up the slack, the business may suffer. This may prompt them to begin looking for a buyer for the company.

Owners or family members may also be struck by unexpected illnesses, forcing them to redirect their attention and resources. It's possible that a relative becomes ill and the owner must relocate quickly to care for them.

The Value Of Your Business Has Increased

In other cases, the owner has no intention of selling their business. That is, until they receive an enticing offer and realize that the benefits of selling outweigh the overall cost of keeping the business running.

To determine whether a deal is worth considering, the owner must weigh the offer against the current returns and the projected amount they will earn in the future.

Too Much Risk

Nobody will argue that running a business is an easy task. It is frequently characterized by stress, late nights, and long hours. However, it also provides a level of freedom not found anywhere else.

It is common for owners to take more risks in the early stages of a business because they do not have much value in their companies to lose. When they take risks, they reap greater rewards and grow faster.

However, as the company grows in size, its value rises. This frequently leads to owners becoming more conservative in their business practices. They risk losing what made them successful in the first place if they make too many changes. Furthermore, older owners become more risk-averse because they simply do not have the time to correct the ship if it deviates too far from its intended course.

Plan ahead of time and don't be too hasty.

Whatever the circumstances are, you should proceed with caution. You don't want to sell your company and later regret it. Similarly, you don't want to invest in a company that will go bankrupt in a year.

When you have a pre-planned exit strategy, you can often avoid stress. Perhaps you already know what conditions must be met before you consider selling your business. However, not everyone has this level of foresight. If you don't already have an exit strategy in place, make sure to carefully consider your options - look at your business plan, consider any potential offers, and consult with those closest to you.

Before The Sale

If you've carefully considered your options and determined that you're ready to sell, your journey isn't over. There are several steps you must take to prepare your company for sale. Take into account the following factors:

Audits of financial statements
Keeping your technology and systems current and efficient
ensuring that your team is content and aware that you are considering selling
The sale's timing
Finding the ideal buyer
Begin preparing for the transitional period by doing the following: Start thinking about who should be in charge once the new owner takes over.
Consider what advice you can give the new owner to ensure their success and the well-being of your employees.

You will also need to set a price for your company. Knowing how much your company is worth will help you get a good deal. However, be wary of arguing over a few dollars in valuation. Make sure to consider the quality of the person who will be purchasing the company. After all, you want to ensure that your legacy is preserved and that your people are cared for.

The best advice is to have an exit strategy in place and be ready to pursue it when your company reaches its peak value or when life tells you it's time to sell.

Advantages and Disadvantages of selling your business

Whatever reasons you may have for selling your business, while there may be benefits, there could be some disadvantages to consider.

Benefits of Selling Your Business

Choosing to sell your business may result in the following advantages:

If economic conditions and market trends generate high demand and attract potential buyers, you may be able to sell your company for a high price.
Selling your company may allow you to pursue other projects, such as investing in another company or finding work with an employer.
Any profit from the sale of your business could be used to pay off personal debts.
You could use the money to fund your decision to take time off, such as to spend more time with family or travel.
If your company is in decline or you are experiencing financial difficulties, selling the company may be a viable option.

Drawbacks of Selling Your Business

There could be potential challenges to selling your business, these may include:

The process of negotiating the sale of your business could be lengthy and time-consuming.
The legal costs of selling a business can be expensive.
You could be required to sign a non-compete agreement which might limit your freedom in consulting with similar businesses or starting anew business in the same area within a given period.
Planning to sell your business will affect any staff you may bring a degree of uncertainty - at the very least it could affect their morale.
If your business is profitable, you could be giving up a lucrative revenue stream.

Key Points for Selling your Business

What is the process for selling a startup? The process for selling a startup will vary depending on the specific circumstances of the business and the preferences of the seller. In general, the process may involve the following steps:
Determine the value of your business: This may involve conducting a valuation analysis or seeking the advice of a financial professional.
Identify potential buyers: This may involve networking with potential buyers, such as venture capitalists, strategic buyers, or private equity firms.
Prepare the necessary documents: This may include financial statements, contracts, and other legal documents related to the sale of the business.
Negotiate the terms of the sale: This may involve discussing the price, payment terms, and any other relevant details of the sale.
Close the deal: This may involve signing a purchase agreement and transferring ownership of the business.
How do I determine the value of my startup?There are several methods for determining the value of a startup, including:
Comparable company analysis: This involves comparing the financial performance and valuation of similar companies in the same industry to estimate the value of your startup.
Earnings multiple method: This involves multiplying the expected future earnings of the business by a predetermined multiple to estimate the value.
Asset-based valuation: This involves valuing the business based on the value of its assets, such as equipment, inventory, and intellectual property.
Discounted cash flow method: This involves estimating the future cash flow of the business and discounting it back to the present to determine the value.
What factors may affect the value of my startup?There are several factors that may affect the value of a startup, including:
Financial performance: The financial performance of the business, including revenue, profitability, and cash flow, can significantly impact the value of the business.
Market conditions: The state of the industry and the overall market can affect the value of the business.
Competitive landscape: The presence of strong competitors can impact the value of the business.
Intellectual property: Patents, trademarks, and other intellectual property can add value to the business.
Management team: The quality and experience of the management team can affect the value of the business.
How do I find potential buyers for my startup?There are several ways to find potential buyers for your startup, including:
Networking with industry contacts: This may involve reaching out to investors, industry professionals, and other business owners to see if they are interested in purchasing a startup.
Utilizing online platforms: There are various online platforms, such as AngelList and Seedrs, that connect startups with potential investors.
Hiring a broker or investment banker: A broker or investment banker can help you identify potential buyers and negotiate the sale of your startup.
Advertising the sale: You can advertise the sale of your startup through online classifieds or by posting on social media platforms.
How do I negotiate the terms of the sale of my startup?The negotiation of the terms of the sale of a startup will depend on the specific circumstances of the business and the preferences of the seller and buyer. Some key considerations may include:
Price: This will likely be a major point of negotiation, as the buyer will want to pay a fair price while the seller will want to maximize the value of the business.
Payment terms: The parties may need to negotiate the terms of payment, including whether the purchase price will be paid

About Jordensky

At Jordensky, we are committed to providing an experience of the highest caliber while specializing in accounting, taxes, MIS, and CFO services for startups and expanding businesses.

When you work with Jordensky, you get a team of finance experts who take the finance work off your plate– ”so you can focus on your business.

Akash Bagrecha

Co-Founder of Jordensky

Best Time to Sell Your Company | Jordensky

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