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When is the Best Time to Sell a Business?

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With an uncertain economy, many business owners may wonder whether now is the best time to sell their business. There are several factors business owners should consider as they determine whether to sell.

What To Consider Before Selling

An owner’s decision to sell their business should not be rushed. It is important that an owner ensures that the business is in a prime position for a potential buyer. Among other things, owners should consider:

  • How much their company is worth;
  • The tax consequences of a sale;
  • The company’s exposure to regulatory action, customer claims, and other liabilities;
  • Continuity of employees and management; and,
  • The effect of the sale on relationships with customers, suppliers, and stakeholders.

The economy is an important factor to consider before selling a business. In particular, business owners should have an understanding of the following:

  • Local Economy — is there a demand for your business right now? Are there new developments in your region that would bring more workers and customers to your area?
  • Market Conditions — this is the area many business owners are focusing on right now as demand in many industries is low and many businesses are for sale. In turn, the buyers that are out there could be expecting to get a “deal” if they buy a business.
  • Industry Trends — business owners should also review the company’s growth to see not only what the business will look like for a potential buyer but how it compares to other businesses in the same industry. If a potential buyer is looking for a business in a certain industry, a business owner will want to do everything in their power to showcase why theirs would be the best for acquisition.

Personal Factors to Consider Before Selling

Another significant consideration business owners need to evaluate is whether they are personally prepared to step away from their business. It is important for owners to reflect on changes in their professional and personal life if they were to sell their business. For some people, the thought of not having to run the business is invigorating (this is especially true for those who are interested in retiring). There are other business owners, though, who rely on having their business to get them through each day. Many sellers negotiate with buyers to retain some type of involvement with the company through the retention of a board seat or a role as an officer or employee, but a seller’s continued involvement is not guaranteed under new ownership, especially if disagreements arise. Therefore, business owners should not consider selling their business if they feel like they would not enjoy their life away from the business.

Don’t Go At It Alone

Selling your business can be an emotionally taxing and complex process. Therefore, sellers must assemble a strong team of advisors early in the process. From Letter of Intent to Closing Day, you will need to continue managing the day-to-day operations of your business. Therefore, it is important to have experienced tax, accounting, and legal advisors at your side. These advisors will help you navigate the strenuous due diligence process, negotiate deal terms, and keep your financial and tax matters in order while maintaining an objective and goal-oriented outlook.

An Essential First Step: The Letter of Intent

A Letter of Intent (LOI) signed by the buyer is an important initial step in the sale process. The document outlines the major terms of the agreement and forms the basis for further negotiations. Crucially, this document often contains confidentiality provisions so that the potential buyer is able to receive a full picture of the company’s health, but is unable to appropriate or disclose any sensitive information. Further, the LOI will serve as an anchor for negotiations, providing a framework for discussion and preventing the erosion of the deal structure.

What Chipman Mazzucco Emerson LLC Can Do To Help

If you are a business owner who is considering selling your business now or know that down the road it may be in your best interest to sell the business, then contact Chipman Mazzucco Emerson LLC. Our team of attorneys has helped business owners weigh all options and we can walk you through the best plan possible.

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