I often get asked this question by business owners, “When is the right time to sell?” Truth be told, this answer is different for every business owner, as there are so many factors involved in the decision to sell. There are some key triggers that if present, I’ll advise a client to pull the trigger and start the selling process. That process should ideally start 2-5 years before the desired sell date to ensure your company is in “prime selling” condition. We all know that life sometimes pulls us in a different path than one we designed, which may determine when that proverbial trigger is indeed to be pulled.
So when should a CEO exit and sell?
- Burnout. Many entrepreneurs get to a tipping point where they are experiencing anxiety, depression, uncontrollable stress, and simply have reached the burn-out stage. Enough is enough and it’s time to move on for your sake and the sake of your employees! If you aren’t happy going to work on a Monday, the universe is telling you something.
- Health. This is one of those life moments that will dictate the sale of a business. A health crisis, be it critical where the owner now has diminished capacity to lead or just a wakeup call for him or her to step back is an unexpected trigger to sell. Often family members will get involved with this decision, especially in the wake-up call scenarios – spouse and/or children putting pressure on the CEO to stop and smell the roses before it’s too late.
- Value. A hard pill to swallow, but a valid one. Often the company that you founded outgrows your skills – not everyone has the capacity to run a multi-million dollar business. You might have been the founder with a great idea and inventor with the ability to sell – that’s very different than managing a team of 50 employees, international supply chains, and successful R&D projections. At this point you will be holding your business back, time to go out on top versus pulling it down.
- Economy. This of course is a gamble. You never know if the market will continue to move in a positive direction or it’s headed for the next 2008. Markets are cyclical, as a business owner you want to watch the trends both nationally and in your area.
- Viability. If you sense a future trend in the market that will make you less attractive to potential buyers, now is the time to sell. Think Kodak film and the invention of digital cameras. If you have the inability to innovate and change with the market trends this is a huge trigger to sell.
- Opportunity. Sometimes serendipity happens and you are offered an amazing deal. We see this a lot in the tech world, but it also happens in other industries as well. Company A creates a product or service at the right time and the right place, but doesn’t have the capital and/or knowledge to take it to the next level and a big dog such as Amazon comes knocking on Company A’s door – I would advise to sell. Offers like that typically have a short shelf life and yes, often happen once in a lifetime.
Ideally you want to control when you are going to sell your business to ensure you’ve done everything you can to make is as attractive as possible to potential buyers. Most entrepreneurs don’t start their business thinking about their exit, but putting those plans in place early saves a lot of headaches when the time comes.