Should I Sell My Business in 2023? How to Know When the Time is Right.
Should I sell my business in 2023?
This is a question that many business owners ask themselves at some point. The answer isn't always easy, but it's essential to consider all of your options.
The last two years have presented a business environment like we’ve never seen before. Many business owners who were planning to sell their businesses, held on to ride out the pandemic. The beginning of 2022 was a great time to sell a business. Currently, with high inflation and the rise of interest rates, business buyers are showing more confidence than business owners.
This could mean a bigger pool of buyers and fewer businesses going onto the market. While financing the purchase of these businesses is more expensive than earlier this year, SBA backed loans are still getting approved.
Here are a few key factors to think about when determining if it’s time to sell your business:
Starting with your long-term goals in mind is the best way to determine if it’s time to sell your business. A lot of factors need to be examined, and this can become overwhelming when trying to look at all the pieces at once. Setting decisive, long-term goals at the very beginning can help you firmly decide when it’s the right time for you to sell your business.
Here are two important questions to consider:
Why do you want to sell your business?
This is one of the first questions any buyer or business broker will ask you. They want to know your reasons for selling to get an idea of how motivated you are. There are a lot of different reasons why someone might sell their business including:
Preparing for retirement
Feeling burned out and ready to make a change
A new opportunity has presented itself
A change in stage of life has occurred
Take the time to articulate your reason for selling, considering the perspective of a potential buyer.
Will the sale of your business enable you to meet your financial goals?
In order to answer this question, it’s best to sit down with your team of advisors to review your numbers and long-term plan. They will be able to help you determine what you need to sell your business for in order to reach your financial goals.
You can also start by asking yourself a few key questions before meeting with your CPA or financial advisor, including:
How does the sale fit into your estate plan?
Will you use the funds to start another business?
Will the funds from the sale be enough to support your current or envisioned lifestyle?
Are you selling your business to become financially independent?
Understanding how the sale of your business can support you financially is a crucial aspect of determining when it’s time to sell.
Internal Factors That Affect The Value of Your Business
Taking a look at your business from the inside may help you determine if now is the right time to sell. Consider the following:
Can your business run without you?
Another critical factor to examine is whether or not your business can run without you. If you're the only one who knows how to do specific tasks, or you're the only one with certain relationships, it might be challenging to sell your business. Here are a few ways to ensure your business can run independently:
Create a sales playbook
Delegate tasks to your team
Establish automatic and recurring systems
Because buyers are typically looking for a business with a team and operational system in place, it’s important to start delegating and automating tasks now.
What is your business worth?
This is one of the most important questions to consider when selling your business. You'll want to have a good idea of what your business is worth before you start talking to potential buyers. There are many different factors that go into determining the value of a business, including:
Potential for growth
These are only a few items used to determine the value of your business, so seeking professional help is detrimental to understanding the true value of your business. Many brokers will provide a free assessment of value to business owners considering their business's sale.
External Factors That Affect The Value of Your Business
The best time to sell is when you can align your long-term goals with the peak of your business or industry. Before selling, it’s important to analyze what’s happening with the economy, your industry, and the market around you.
What is the potential outlook for my business and industry?
Comparing your business with what’s going on in your market can help you determine if now is the right time to sell. Here are a few things to ask yourself:
Is competition becoming stronger in your industry?
Are your sales growing or declining?
Is the value of your business increasing or decreasing?
Is your business part of a growing or declining industry?
If you’re unsure of what your market currently looks like, reviewing external factors is something an experienced business broker can help you with.
Life After the Sale
Part of determining if now is the right time to sell your business is understanding what you will do after the sale is complete. Many business owners are ready to sell without fully contemplating what life will look like afterward. An important question to ask yourself is:
What do you envision for your life after you sell your business?
This is an essential question because it can help you determine your motivation for selling. Additionally, creating a successful exit plan takes time and planning so it helps to begin with the end in mind. Start by asking yourself key questions about what you would like do after the sale of your business:
Do you want to retire?
Do you want to start a new business?
What will you do with your free time?
What will be different about your life after you sell your business?
Knowing what you want to do after selling your business can help clarify the decision and help the sale align with your long-term goals.
Need help getting started?
We provide a free consultation. Talk with one of our business advisors to help you understand if we are the right Sacramento business broker to work with. They will help guide you through the process and answer any questions that you may have.