Are you trying to time the sale of your business so that you exit when both your business and the economy are peaking?
While your objective to build your company’s value is admirable, here are five reasons why you may want to sell sooner than you might think:
- You May Be Choking Your Business
When you start your business, you have nothing to lose, so you risk it all on your idea. But as you grow, you naturally become more conservative, because your business actually becomes worth something. For many of us, our company is our largest asset, so the idea of losing it on a new growth idea becomes less attractive. We become more conservative and hinder our company’s growth.
- Money Is Cheap
We’re coming out of a period of ultra-low interest rates. Financial buyers will likely borrow money to buy your business so—at the risk of over simplifying a lot of MBA math—the less it costs them to borrow, the more they will spend to buy your business.
- Timing Your Sale Is A Fool’s Errand
The costs of most financial assets are correlated, which is to say that the value of your private business, real estate and a Fortune 500 company’s stock all move in roughly the same direction. They all laid an egg in 2009 and now they are all booming. The problem is, you’ll have to do something with the money you make from the sale of your company, which means you will likely buy into a new asset class at the same frothy valuation as you are exiting at.
- Cybercrime
If you have moved your customer data into the cloud, it is only a matter of time before you become the target of cybercrime. Randy Ambrosie, the former CEO of 3Macs, a Montreal-based investment company that manages $6 billion for wealthy Canadian families decided to sell in part because he feared a cyber attack. Ambrosie and his partners realized they had been under-investing in technology for years, at a time when cybercrime was becoming more prevalent in the financial services space. Ambrosie decided to sell his firm to Raymond James because he realized the cost for staying ahead of hackers was becoming too much to bear.
- There Is No Corporate Ladder
In most occupations, the ambitious must climb the ladder. Aspiring CEOs must methodically move up, stacking one job on the next until they are ready for the top post. They have to put in the time, play the right politics and succeed at each new assignment to be considered for the next rung.
By choosing a career as an entrepreneur, you get to skip the ladder entirely. You can start a business, sell it, take a sabbatical and start another business and nobody will miss you on the ladder. Your second (or third) business is likely to be more successful than your first, so the sooner you sell your existing business, the sooner you get to take a break and then start working on your next.
It can be tempting to want to time the sale of your business so that the economy and your company are peeking, but in reality, it may be better to sell sooner rather than later.
Bottom line: be prepared to exit on your terms. Meanwhile, keep working on building value in your business. For a quick view into where you stand, take this self-assessment. CLICK HERE
Chris is Managing Director with Valuation Research Corporation in Norwood, MA. Chris has over 28 years of business valuation experience involving the valuation of over 3,000 businesses and intangible asset valuations. He has started, ran for 15 years, and sold his own business; earned 6 professional certifications; served on several valuation committees; published several articles; led over 100 seminars; provided expert testimony in court; and co-authored a valuation text book – Valuation for M&A: Building Value in Private Companies. 
David Hirsch a Corporate Attorney with Hinckley Allen & Snyder LLP in Providence. David focuses his practice in the areas of corporate and business law, including commercial and public finance and mergers and acquisitions. He represents companies in general corporate matters and assists with a broad range of business and financing transactions. David also has experience advising financial institutions regarding regulatory compliance. 
Rob Kerr is Managing Director of CBIZ Tofias in Providence. Rob is a CPA with more than 15 years of experience in tax planning, consulting and compliance services for public companies, privately-held corporations, partnerships and individuals. Rob specializes in the private equity and venture capital industry where he provides assistance with domestic and international tax planning and compliance projects. And extensive experience working with Internal Revenue Code Section 382, assisting clients with ownership changes and associated impact against the certain tax attributes. 
Mike Tamasi is the President & CEO of AccuRounds in Avon, MA. A second- generation owner since 1985, Mike is responsible for overall strategy and organizational alignment guided by “The Path to Perfection” – providing opportunity for every member of the AccuRounds team. Mike is co-chair of the Massachusetts Advanced Manufacturing Collaborative and Chairman of Business Leaders United. 
