How do you determine the best time to sell your small business?

It needs total review. If you're burned out, you may decide to sell up your business and home in order to downsize into a healthier standard of living. It may be that you want to sell for top dollar and nothing else will satisfy you. Every individual will have their own story and it is important each manages their business sale to deliver the outcome they want.

Deciding to sell your small business is not an easy decision, but it is often a necessary one. Whether it’s to pursue new opportunities or to free up time to spend with your family, taking this step requires careful thought and consideration. As you evaluate your options, keep in mind that you are not alone in this process. With the right mindset and approach, you can confidently make the best decision for your small business. Here are three tips to help you navigate this important decision: assess the current market, seek the advice of experts, and establish a clear timeline. Remember, selling your small business is not an end, but rather a new beginning. Stay positive and always keep your eyes on the horizon.

Start here. If selling your business doesn't accomplish your personal goals, then what were all the headaches, sleepless nights and shortened vacations for? There will be many people telling you what you should want from your business. If they haven't asked you what you want, I encourage you to ignore all of their advice because selling your business is probably more about what they want. Like AUM, billable hours or referral fees. This is likely the most significant transaction of your life, and it's permanent, make sure your advisors are just as invested in your outcome as you are.

Be aware that your digital performance can influence buyers too. Potential buyers may be interested in the size and responsiveness of your email list, the amount of paid and organic traffic you get to your website, and your social media presence. Google Analytics, your email service provider, and social media insights can provide the data you’ll need to provide to buyers.

All good points, a good bookkeeper can help you keep track of these metrics and in order to be appropriately positioned to sell you need to allocate time, resources and appropriate systems to keeping on top of these numbers in order to be poised and ready to sell at the right time.

Think of your business's performance, not yours. If your business is a gold mine as long as you're the one opening the doors at 8 every day and locking them at 5, but wouldn't survive the week without you, then you are going to have a very limited buyer pool for your business. They also likely won't have any money. Build a business that thrives without your daily management. That's a business that will get a qualified buyer's attention.

In my experience facilitating many transactions, sellers often underestimate the scope and breadth of due diligence that buyers and their lenders will require. The ill-prepared seller will miss deadlines to produce records, causing the closing to be delayed or even jeopardizing the deal. When selling your business, work with an attorney who has experience. They'll be able to help you anticipate due diligence requests and potential issues. Be prepared to push documents fast to keep the deal going and close loopholes that buyers might try to exploint to get out of the deal.

Not only will buyers want these documents but their lenders as well. The loan committment might be dependent on your ability to produce clean, convincing financials. It could be the difference between selling your business or losing the deal.

Due diligence will make an IRS audit look like a friendly once-over. Be prepared. Have everything that a buyer could request at hand. Be ready to answer any questions that they are likely to have. If your inventory doubled year-over-year and your revenue didn't, you should have a better response than "Huh, that's interesting. My CPA usually gets this stuff. Lemme email him" A good buyer will assume you don't know your numbers and grab a bigger microscope.

Streamline Processes: review your current workflows and identify areas that can be simplified or automated. Look for bottlenecks, unnecessary steps, or duplicated efforts. Streamlining processes can save time and resources, improve productivity, and reduce errors. Remember, every saved dollar equals an earned dollar. If you don't know how to approach it, find and hire someone. Even superficial automation can increase output by up to 40%.

How will your business run during and after your exit? Remember, a buyer isn't buying your business, they're buying the one that you leave behind. That's a lot of wrinkles to add to a business. Make sure you have a business built to thrive following an acquisition. That means all kinds of continuity planning and pre-diligence. I know, fun stuff, but it could be make or break.

Who buys your business is more important than you probably think. Not all buyers are equal. That cash-rich PE firm will probably treat your company very differently than your cash poor GM. Neither is good or bad, they will probably just have very different goals in their acquisition. Be prepared for the consequences, financially, professionally and personally.

In my experience with business owners the decision on how to sell your small business is inherently tied to the uniqueness of their venture. For very small businesses, the option of self-listing might seem viable, but as the complexity and value of your business increase, so does the need for specialized support. As a business owner, this decision is pivotal; it's about safeguarding what you've built and maximizing value. A seasoned business broker offers more than a service—they offer a personalized approach, industry connections, and a level of expertise that ensures your business is showcased to the right audience. Choosing the right method isn't just about a transaction; it's about securing the legacy of your business with confidence.

The timing to sell a business is a very subjective one. Most founders find the perfect one is when you don't have to. The rationale for the sale may vary from needing to scale up, wanting an exit because it has become mundane (not inspiring anymore), or the mere reason of needing additional resources and the owners are no longer capable of providing the finances. What is your motivation to sell?

Consider what kind of buyer could most benefit by acquiring your company. Would a competitor be interested in buying you out? Or a newcomer to the industry that wants to quickly acquire customers? How would acquiring your business benefit them? Contact top management in those companies to see if they are interested. Understand the real value of your business to potential buyers. Research sales of similar businesses that operate in similar neighborhoods and/or in similar online niches. Set your asking price based on your research, remembering to leave room for negotiation. And, as Lourdes Gant already mentioned, timing is important.

Some businesses will not have a "Pot of Gold at the end sale "opportunity. Having a planning conversation about what options and alternatives there are sooner than later to support a retirement goal will be invaluable.

One critical aspect often overlooked is the paramount importance of confidentiality in the business selling journey. The repercussions of premature news about the sale can strain relationships with employees, vendors, competitors, and customers. A skilled business broker adeptly navigates this challenge, creating compelling ads that attract potential buyers without divulging the business's identity or confidential information. By entrusting the process to a broker, you not only protect confidentiality but also gain an experienced guide, freeing your time to concentrate on running your business.

Selling a business does take careful planning and a deep dive into the finances. Just because the financials look really pretty, does not mean that the full story of the business is there, specifically intangibles. Examples of those are franchise agreements, distributorship agreements, special agreements with suppliers, Master Service Agreements, patents, copyrights, etc.