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When is the Best Time to Sell My Business?

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in The Business of Business Finance

The very best time to sell your company is about 18 months before your company sales peak. 

The typical small company will take between 6 and 9 months to sell, and the buyer will feel confident with his/her ability to forecast another 6 to 9 months into the future.  So, to be safe, you'll want to have increasing sales for 18 months from the time you decide to sell your company.

This presents a few obvious challenges.

First, almost every entrepreneur I know is an optimist.  You always see a bigger future, better opportunities and new markets.  As a group, the glass is always at least half full, so the common response to "when will your sales peak?" is not something that typically registers, let alone gets considered on its merits.

Secondly, even for the more practical business owner, the ability to accurately predict anything 18 months into the future is a useless exercise.  Big sales are lost, contracts fall through, administrations change, technology advances, prices fall, margins compress, distribution channels disappear — you name it.  Any of these events has the ability to impact your sales and significantly alter the value of your company.

Third, it will not seem logical to sell your company when everything is "going great."  Remember when the Dow Jones average peaked at 14,164 on Oct. 9, 2007?  Did you sell?

It would have been an extraordinary feat to predict that date as the market peak, and even more remarkable to have forecasted that market top in April of 2006 (18 months in advance).

Keep in mind that when you sell your company, you are not selling your past performance or current achievements, but the future — your future and the ability for a buyer to continue your success without you.  The best time to accomplish that is when every thing looks strong, exciting and is still growing.  Buyer excitement and a strong sales growth rate into the foreseeable future will help hide other company problems.

I'm currently working with a business owner who wants to sell his company.  He is now having second thoughts because they recently won two new contracts and their top line revenue number is expanding nicely.  So I reminded him, the time it will "feel right" (in his mind) to sell is when he is not longer excited about his future.  If he is not excited, neither will his potential buyer...


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