How to Determine the Right Time to Sell Your Business

Deciding when to sell your business can be challenging. One effective approach is to consider selling when someone else is prepared to invest more in your company than you are.

When you first start your business, you're likely the biggest believer in its success. You work long hours and invest a significant portion of your own resources to get things off the ground. Your commitment is unmatched.

In the beginning, you might be more willing to take risks because the business is relatively undervalued. As the saying goes, “When you ain't got nothing, you got nothing to lose.”

However, as your business matures and its value increases, your tolerance for risk often diminishes. You may become hesitant to risk the equity you've built up in pursuit of new strategies. At this point, a prospective buyer might be willing to take on risks that you are no longer comfortable with.

Case Study: Peach New Media

Consider David Will, founder of Peach New Media, who started his company in 2000 as a web conferencing reseller. After several strategic pivots, Will focused on selling learning management software to associations. By 2015, Peach New Media had grown to 40 employees and received a lucrative acquisition offer from a large private equity firm.

Despite his attachment to the business and his team, Will recognized that his risk tolerance had diminished as his company’s value had increased. The potential buyer was prepared to make a significant investment in integrating Peach New Media into its portfolio, a risk Will was no longer willing to take. Ultimately, Will decided that selling was the best choice.

When to Sell

The ideal time to sell is when a buyer is willing to invest more in your business than you are. This point varies for each entrepreneur. For example:

- If your business is worth $1 million, would you risk everything on a new strategy to potentially grow it to $10 million? Many entrepreneurs would take that chance.

- If your business is valued at $10 million and represents the majority of your net worth, the stakes change. While $10 million is substantial, the risk of gambling it all for a shot at $100 million might seem too great for many. The potential reward, while significant, is often outweighed by the risk.

- If your business is worth $100 million, the idea of risking it all for a chance to become a billion-dollar company becomes even more daunting. While it’s difficult to imagine betting such a large amount, CEOs of billion-dollar corporations might be more inclined to make such a high-stakes gamble.

Ultimately, when someone else is ready to invest more in your business than you are, it could be a sign that it’s time to consider selling.