Picking the right time to sell a business can mean the difference between a substantial retirement income and nothing.
Every business will go through four stages of a life cycle. Please see the graph below.
The smart time to sell is when the business has completed its growth stage and is beginning to mature. At this point the business will realise its maximum value.
Too many owners try to sell at the decline stage because they haven’t recognized that their business is in decline. Sometimes the decline is due to increased competition in a mature and no longer growth industry. The competition is fierce and the margins low, hence the whole industry is in decline. Sometimes owners lose some of their passion for the business and the business loses its competitiveness. Frequently the owners have not taken the time to devise or implement systems that allow the business to operate without them.
The high growth and early maturity stages are the ones that will bring the highest selling price. Consequently, this is the period we should be in at sales time.
To sell at the appropriate time will require the owner to take advantage of the growth trajectory and show that the business is a strong money maker.
Over here you can do a self assessment and rate your own preparation for exiting.
See here for what prospective buyers want from a business.