Edit ModuleShow Tags

Is it time to sell your business?

Three things to consider when you want to sell


Published:

How do you know when it’s time to sell?

Unless you started your business with a specific exit date in mind, answering this question can be incredibly difficult. You have poured more hours, sweat and energy into your business than you can count, and you have recruited good, talented people who believe in your vision. How can you call it quits and decide to sell?

The answer? When it makes sense to.

Consider these three topics:

  • Market Risk - Has the business environment in general, or the environment for my specific market, shifted since the company began? Would I start this business today? These aren’t intended to be ‘yes or no’ questions, but should prompt you to take a look at the environment as if you were starting a new business today. If you wouldn’t start your business today, chances are you shouldn’t continue to own it.
     
  • Personal Asset Risk - How much of my personal assets are tied up in the business? If the business had a 50% decline in value, would my family still be okay? Again, these are not necessarily ‘yes or no’ questions, but considering this type of financial impact is intended to be a fear-setting exercise. By analyzing the specific impact of a 50% hit to either profitability or revenue (whichever makes the most sense for you), you can visualize what that would mean. For example, if your total owner benefit is $500,000 per year now and it drops to $250,000, how do you feel about that? If your revenue drops 50% and you need to lay off four people, think about doing that and what your team will look and feel like afterward. If these outcomes are all positive, it makes the risk of still owning your business a bit more palatable. 
     
  • Value Maximization - What type of value are you trying to maximize? And when will you know that you are there? Is it a business valuation represented by a specific number and, if so, when do you think you will hit that number? Is the value tied to annual owner benefit and cash flow? Do you see these owner benefits and cash flows topping out or declining at some point? 
    ‚Äč
    Does success mean that you are creating impact through an innovative service or product? Is it changing the lives of your employees or customers? Be specific on what maximizing value looks like for you, when you think you will achieve it and whether it is ongoing or if there is an end game.

By taking a look at the specific components of risk, value and outcomes, you can remove the ambiguity and some of the emotion tied to understanding if-and-when to sell your business.

This article is intended for general informational purposes and does not constitute a recommendation of any type. Please seek advice from your tax, legal, and financial professional prior to taking action.Securities Offered through Destiny Capital Securities Corporation, member FINRA/SIPC.

Jarrod Musick, CFP, is the CEO and president of Destiny Capital. Musick serves his clients as their wealth strategist, with a primary focus on business owners. His passions include solving complex problems and building systems for our clients to allow them to focus on what matters most to them in their lives. Learn more about him at http://bit.ly/jarrod-musick.

Edit Module

Get more content like this: Subscribe to the magazine | Sign up for our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

How to maintain business communication, connection in the wake of coronavirus

While we are at home scrambling to figure out what normal looks like right now for our businesses, taking care of ourselves and trying to keep our children occupied, we need to assess our virtual communication strategies. Here are some quick ideas on how to pivot your existing marketing plan with smart messaging that will benefit your business and your clients.

Row the boat to build wealth

Rowing a boat is not easy. We must keep the oars in the water, learn from the past, keep moving forward in the right direction and have a plan. Over time, the destination will be reached. While building wealth, it is important to define the destination or financial dreams.

The real estate risk no one is talking about

The explosive growth in nightly rentals has exposed (no pun intended) millions of property owners to a new risk due to the virus fallout. What impact will rental owners see in the coming months?
Edit ModuleShow Tags
Edit Module


 

Edit ModuleShow Tags
Edit Module
Edit ModuleShow Tags Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags
Edit ModuleShow Tags Edit ModuleShow Tags