Cyber Monday is upon us. Your inbox is probably filled with deals. Most online retailers are offering some type of “deals” today. But if you read the fine print, or if you look at the price history, many of the “deals” may not really be good deals. If you are running a business, you may be the one offering Cyber Monday deals. One type of deal you probably shouldn’t be offering is if you are in the process of selling your business. Absent some really compelling reason, if you are selling your business, offering a discount just because it’s Cyber Monday doesn’t make a lot of sense. Last week, TechCrunch had a good post from Joe Procopio about what happens when it’s time to sell your startup business. If you also couple it with Ben Faw’s article about the 5 lessons he learned from selling his startup, you’ve got some pretty interesting reading when you are considering selling your business.

When Is It Time to Sell?

The first big decision you’ll confront is: When is it time to sell?

Procopio lays out four reasons you may be ready to sell,

  • Things are going poorly;
  • Things are going extremely well;
  • An external factor; or
  • You’ve taken it as far as you can.

Each reason seems pretty self-explanatory. Do you see yourself in one of these? If so, it may be time to consider selling.

There can be a variety of different ways your business can be sold. Before you embark on the journey, you need to first figure out how strong your position is. For negotiation purposes, if you have a business that is doing extremely well, you’ll have a lot of leverage. Things not going so well? You may need to consider some kind of discount.

Once you’ve figured out your leverage, you next need to sort out the value of the company. One of the key measures that any investor will want to know is what your annual revenue is. If you have a service business, then your value is likely 1 to 2 times your annual revenue. Selling products? Your valuation can be anywhere from 2 to 10 times your annual revenue.

After the process has started, Procopio points out the timeline can be flexible. But the other thing that he points out is that you also need to figure out what life will look like after the business has been sold. If you’ve spent years building the business, but you’ll no longer be involved, how will you fill your time? Can you imagine life without your business? Will you move on to another business? Will you be able to retire? There’s a serious psychological impact on a business owner that sells their business. You can’t ignore this as part of your planning.

Next Steps

Thinking about selling your business (or thinking of buying a business from someone else), call my office to set up a Legal Strategy Session and we can review the best options for you – (877) AMAYERS.

Andrew Ayers
Connect with me
I work with business and estate planning clients to craft legal solutions to protect their legacies.
Post A Comment