When your business-owner clients begin thinking about selling their businesses, they may probe you as you discuss a possible sale for how to determine what is the “right” time.
Ideally, sellers would time their move when the buying market is strong. They do tend to have some sense of that. They hear news of other sellers, and they may notice an uptick in those constant unsolicited calls to inquire about possible interest in sale.
Financial advisors also often have a fairly strong sense of the market, too, both from learning details of other transactions that have occurred and from reading about recent activity on a broader base. Timing to enjoy a competitive market can make a company worth between 25% and 50% more than it might have been otherwise.
Owners naturally need to consider a myriad of personal circumstances to decide if such consideration is worthwhile. Often advisors assume that the time to consider a sale is probably not until the owner reaches an age of likely retirement, maybe 60 or 65. Not so! Our firm sells middle-market companies 365 days a year, and more than 75% of our sellers are in their 40s. Owners north of 60 often become very fearful and tense about the possibility of sale. Much of this relates to uncertainty about what they will do daily without a company to run. They are afraid of such change. As a result, they often wait too long and sell for less.