Business Exit: Options and Timing
By Jack Lyons, CEPA
President, Lyons Solutions LLC
Choosing the right business exit option and timing may be the most important decisions you can make when existing or selling your business. If you don’t make the right decisions, you may never realize a good value for your business. In fact, you probably won’t.
Five Common Ways to Exit Your Business
There are a number of profitable ways for a business owner to exit a business. The optimal strategy at one point in time may not be available at another point. Here are five of the most common exit options.
- Selling to employees or other owners of the business
- Selling to a strategic buyer
- Selling to a financial buyer
- Selling or transferring the business to a family member
- Selling to an ESOP
Each option has advantages and disadvantages. Unless you need to quickly sell the business, you must first explore all your options and consider both the structure of the sale and what you will do post-sale. Seeking professional assistance can often pay huge dividends in arriving at the best outcome. Business owners who know well in advance that they want to sell their business have time to make it more attractive to buyers and to build up value.
Timing is Crucial
We’ve all seen that the value of any publicly traded stock varies greatly over a period of time. The same holds true for a privately held business. What many business owners fail to realize is that for the sale of a business there is a mantra- timing, timing, timing. Don’t suffer from timing myopia! Consider these factors to determine the optimal time to exit your business:
- Buyer Interest: Are there buyers currently interested in companies like yours? Have you recently been approached by more than one buyer? Is there a consolidation going on in your industry? These are signs that a cyclical buying trend is taking place in your industry. So, if you’re near being ready to sell, maybe you should seriously consider selling now. Pricing of acquisitions peaks during a period of industry consolidation. Postponing the sale may end up being a bad decision if there is limited buying activity later.
- Economic Climate: What is the current economic climate? If it is strong, your company is growing in value and it may be the right time to sell. However, a good, well-run business can be attractive to business buyers in any economy, especially if the business is realistically priced and the terms and are well positioned for sale.
- Demographic Trend: There are 10,000 people in the United States who turn 60 years old each day. After turning 60 years old, many owners of privately held companies contemplate the sale or exit of their business. Due to the recent economic climate, many owners have put off selling their businesses until their companies become more profitable. Eventually, they will want to sell and do something else. We all know the laws of supply and demand. If the supply of businesses for sale increases, the overall pricing for businesses will decrease.
- Product or Service Life Cycle: Is it becoming increasingly competitive in the marketplace? Are you finding that pricing pressure by your customers is becoming stronger? Will the global markets affect your business? Will advances in technology affect your business lifecycle? If any of these events are happening, the future prospects for your company are being impacted. How will this affect the overall viability of your business?
- Burn Out Factor: Do you still have a passion for your business or are you just coasting along? Are you really the one who can take your company to the next level, or is it stuck where it is? Do you have the staying power to effectively operate your company during the next economic down cycle or not? Are you burned out? This is a good time to take stock of where you are personally, regardless of anything else that may be going on.
Timing may be the most critical element in the exit from or sale of a business. You’ve got to know when to consider it as being the right time. A professional exit planner can offer experience and expertise with both the personal and business aspects of selling your company.
If you're thinking about selling your business, call Jack Lyons at (941) 497-4700.
© Copyright 2011 Jack Lyons. All Rights Reserved.