Right Time To Sell Your Biz

The obvious answer is when you have a buyer with cash ready to buy. The serious answer is when you have had a pretty decent three-year run with a rising profit each year. A buyer likes to see increasing profits each year. They also like to see bills paid on time and no delinquent debt. A steady deposit flow in the bank, little employee turnover and increasing table occupancy are all signs of a healthy business.

Health or Intended retirement

These both are legitimate reasons for selling a business. A key partner’s death would be another solid reason. Any time you wish to sell a business, you will be asked why you are selling and walking away from a sure income. The reason must stand scrutiny and in any case the business numbers must back up your asking price.

Selling an existing business vs. starting one

According to industry statistics, the chances of a new restaurant making it and being live and well at the end of a year are one in ten. The odds for success are not very good even for an experienced owner.

Buying one with a following that has been around for a while and has healthy numbers would seem to be a better gamble on the part of a new owner. If your business were one of these, then almost anytime would be a time to sell.

After the first of the year would seem to be a good time to sell as the owner has gotten the benefit of the holiday business and the next few weeks may be slow as the public recovers from holiday spending.

A new start up has the problem of marketing a new entity and making the potential customers ready to try your company out for the first time. This marketing is far different than what an existing business would do.

Hotel and Resort business selling time

If there is a natural time of the year when the tourist business slows down, then that is the time to make a sale final. The old owner would have gotten full value from his ownership and the new owner will have to live through the slow period.

Of course the new owner if he has his wits about him would know this and take this into consideration when finalizing the sale. If he is unaware of this natural slow time then he has not done his homework or the broker working for him has fallen down on the job.

This slow time may work to the new owner’s advantage if he plans to change the décor or the menu of the restaurant. It is also a natural time for employee turnover as this period is usually one for short layoffs of staff. A full-scale grand opening can be advertised for several weeks, with the mandatory invitation of the press, radio and TV. Any organization, a new owner belongs to should be invited in for a special evening of their own. Birthdays that fall within a week or so of the grand opening could be given special consideration.
If there is special time of the year for your business, use it

If there is a time that your business is really humming, use it to advantage to show off what your business is like. Any new potential owner wants to see activity in a business they are thinking of purchasing. These active weeks or months can be used to show the possible new owner what they can expect if they become the owner.

You would need to make it clear that this is a normal occurrence, but not a year around day-to-day example of the business’s operation. But there is nothing wrong with showing the business off at its best

After tax time, time to sell

Speak with your accountant as to a better time to sell your business as far as taxes are considered. All expenses related to the sale of your business can be written off against the sale. It may be better to make the sale final in a year where you have little other income. In other words run the company to the end of the year and then sell it after the first of the year. Make sure you get professional advice that is specific to your situation.

It may be possible to make a three way deal out of the sale to cut taxes for the present owner. Maybe a sale could be made to another member of the family with no tax problems and then the sale to the new owner. It is a possible way to get money to an heir.

Cut expenses

It may be worthwhile to lower your inventory as low as possible and also cut out any other expenses without hurting the business. This could include some advertising that is done on a monthly basis or similar expenses. If the sale is going to be final in two months, then cutting out non-essential spending makes sense, as the new owner will probably want to change things to their way of doing things.

Any long-term agreements that come up or are up for renewal should be discussed with the new owner before committing to them. Make sure they are transferable to the new owner and that is acceptable to both parties. The last thing you want to happen is a last minute problem that could jeopardize the sale.

Any repairs that can be delayed without hurting the business should be put off until after the sale is final. Maybe the new owner will replace rather than repair. New signs or roofs should be discussed with the new owner before taking on the obligation.

Conclusions for a time to sell

As you can see there are many situations that make it the right time to sell. Each deal is different and will have critical times that steps should be taken. The owner would be well advised to make a list of these criteria and use this list as a guide for timing the sale. After collecting the information as to the best time to be out of the company, the owner can plan to try to make the sale happen at that time.

Sell the company if possible after a profitable run of years. This gives validity to your asking price. Businesses with this income history are sold for a premium compared to a business that is just starting to make money. The money history is one of the most critical factors in the sale of any business.

Tax considerations, seasonal timing or a sale prompted by health or retirement reasons are all valid times to sell. If you are lucky enough to get more than one prospect bidding on your company, then you are certainly at the right time to sell. As stated at the beginning of this article the right time does turn out to be when you have a buyer willing to buy. A cash buyer is a thing of beauty and should be treated well.