In the lifecycle of every business there comes a time to consider if “NOW” is the correct time to sell, assuming selling is the ultimate intention of the owner(s) to generate liquidity for retirement. While the question is always the same, the answer can vary greatly depending on the impetus for the question and a host of internal and external factors to be considered. In this article, we will explore four key exit timing considerations:
1. Market Timing
Never in the control of the business owner, market timing can be fickle and unpredictable. The economy and stock market cycles can have significant impacts on value. What’s more, these cycles are driven by forces completely external to your business and can last weeks, months, or even years. A thriving market may push business owners to consider an earlier than anticipated exit and a recessionary market may create concern about the current and future value, and sales potential of the business.
2. Industry Timing
Similar to market timing, industry timing is not usually in the control of the business owner, unless the company is one of the largest players in that given industry. If your business is not an industry giant, it will be important to understand the impact of common industry occurrences. For example, fragmented industries can go through waves of consolidation when values get driven up, followed by periods where values are down after the consolidating dust has settled.
3. Business Timing
Owners have significant control over business timing and should consider periods of strong revenue and earnings growth as potential windows of opportunity to optimize an exit. Other highly controllable factors such as the capturing and maintaining quality information, quantitative data showing predictable and sustainable earnings, and demonstrating that the business runs well day-to-day with limited involvement from the owner(s), are important internal value drivers signaling to potential buyers that the business is poised to sell.
4. Personal Timing
Although specific to the individual business owner, personal timing is often a reactionary response driving a business owner toward selling regardless of readiness. Commonly these drivers include health related issues, fatigue, capital constraints, shareholder disagreements, declining financial performance or an approach by one, unsolicited buyer.
It is a rare scenario in which market, industry, business and personal timing align for the serendipitous sale of a business, which is why business owners should focus on internal value drivers as an ongoing practice. Quality information drivers such as financial reporting, managing for tax efficiency vs. profits, and management information systems as well as strategy and operational drivers such as proprietary assets, maintaining positive market position, geographic coverage, diversity and legal structure all work together to position the business as “ready to sell”. Operating with a “ready to sell” approach allows business owners to quickly respond when market and industry timing is right or when personal timing forces an early and unforeseen exit.
ABOUT WINDWARD ADVISORS
Windward Advisors, LLC is a sell-side, buy-side, capital raise, and corporate growth advisory firm. Windward specializes in helping business owners better prepare their businesses, with the intention of increasing shareholder value by providing strategic planning and corporate growth advisory services, and by representing owners in the execution of sales, acquisitions, and financial structuring transactions. Windward is an advocate of ensuring that business owners are knowledgeable about their alternatives and we work closely with other trusted advisors to assist owners with properly preparing before pursuing transactions.
Steve Howell showell@towindward.com and Barry Johnson bjohnson@towindward.com
Managing Directors
(804) 784-7191
www.towindward.com
MR. HOWELL AND MR. JOHNSON ARE REGISTERED REPRESENTATIVES OF, AND SECURITIES PRODUCTS AND INVESTMENT BANKING SERVICES ARE OFFERED THROUGH BA SECURITIES, LLC, MEMBER FINRA SIPC. WINDWARD ADVISORS, LLC IS A SEPARATE ENTITY FROM BA SECURITIES, LLC.
WINDWARD ADVISORS, LLC &BA SECURITIES, LLC ARE NOT AFFILIATED ENTITIES.