3 Critical Factors to Determine the Right Time to Sell

1. Ownership has a highly compelling reason to exit the business. In some cases, the current ownership may have personal reasons to exit such as irreconcilable differences between the co-owners, lack of an heir, or health problems.

Other times, owners simply need to pull liquidity out of a business to invest in an emerging opportunity. Or ownership may decide that the risk associated with that business is too great. Investment criteria can also play a role if the business isn’t performing in line with the owner’s desired rate of return.

2. Ownership is fairly confident their strategic goals will be met through a sale. This may depend on current industry multiples or other market factors outside of the owner’s control. But in some cases, ownership and the business’s executives can play an instrumental role in increasing the probability of success, by a) valuing their company at or near a realistic number and b) employing a diligent and thorough process in marketing the company.

This is possibly the most important factor when deciding if it is the “right” time to sell, and is related to several external factors:

Overall performance of the global, national, regional, and local economy Idiosyncratic risks/outlook associated with that industry

Individual company performance relative to overall market performance individual company performance relative to its competitors

Socio-political and regulatory environment

3. Ownership is mentally prepared to divest.

Are you ready to exit the business you’ve worked so hard to build? Ambivalence on this front may negatively affect the exit planning process. To prepare yourself for divestiture, think about what you will spend your time doing after you’ve exited the business, and be realistic. If you’re used to working 12-hour days, and find satisfaction in your work, you may not enjoy constant relaxation as much as you think. You might plan to start a new venture, or dive headfirst into a passion that was formerly a hobby. Perhaps you’ll spend your time travelling. Whatever it may be, crafting a plan will help make exiting your business easier.