Many business owners make the critical mistake of waiting until they feel cornered to sell their business. This reactive approach can diminish the value of your company, placing you at the mercy of buyers who see your situation as an opportunity to drive down the price. Here’s the hard truth: when you’re desperate to sell, it’s already too late.
Sell on the Upswing
The ideal time to sell your business is when it’s thriving, not when it’s slowing down. If your company is still growing, profits are strong, and the market is favorable, this is when you have leverage. Buyers will recognize the value of acquiring a business with momentum, and your valuation will reflect that strength. However, if you wait until your business starts to decline, buyers will see the downturn as a red flag, and your valuation will suffer. In this scenario, you lose bargaining power, and buyers may use your weakness as leverage to lowball their offer.
Look around
Selling at the right time doesn’t just mean your business needs to be performing well. You also need to be aware of the broader market dynamics. The potential buyers for your company—whether they are competitors, private equity firms, or strategic acquirers—might be actively consolidating. If you wait too long, those companies may have already made their acquisitions and moved on, leaving you with fewer options and a weaker negotiating position. As companies get acquired, the pool of potential buyers shrinks, and the remaining players may not see the same strategic value in your business.
Avoid Selling Out of Desperation
Selling out of necessity places you in a vulnerable position. Whether it’s due to financial stress, burnout, or market downturns, desperation can cloud judgment, and buyers will notice. They will exploit your situation by offering far less than your business might be worth under better circumstances. Remember, buyers aren’t just purchasing your current operations; they are paying for the future growth they believe your company can achieve. If you wait until you’re struggling, it’s much harder to convince them of that potential.
Get Ahead of the Process
A strategic sale is a process, not an event. By starting early, you can engage with advisors and begin a thorough evaluation of your business’s strategic value, financials, operations, and market position. You’ll have time to improve areas that may be less appealing to buyers, rather than rushing to fix them in the middle of a sale.
The key to maximizing value is simple: don’t wait until you have no choice but to sell. Plan ahead, sell when your business is performing well, and engage the market when the window is open—not after it’s already closed.
