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Is now the right time to sell your business?

We regularly meet business owners who tell us they intend to sell their business within the next two or three years. In many cases, particularly at the moment, they are waiting for the “market to improve” before trying to sell.

Our advice? It’s late 2012, the economy has been fairly flat for five years and it’s unlikely there’s a boom around the corner. But there are still plenty of deals being done with excellent outcomes for sellers, so you don’t have to put off selling indefinitely …

Here are some observations from helping clients sell dozens of businesses over many years:

    1. Buyers often want to buy growth, so if you wait until your growth has peaked you may miss the best time to sell. Too many business owners wait for another year of good performance, then another and eventually they sometimes have no growth story left to sell.

    2. Also it’s important to sell is when buyers are buying. In some industries the buyer cycle can make a huge difference to outcomes, in others less so.  There are many things which can influence buyer appetite and you won’t hear about them on the evening news.

    3. Most private company deals are structured so that some of the total consideration is paid over time and future payments are often contingent on future performance. The structure of the deal often has more impact on the final outcome than the simple multiple used in the negotiations. 

    4. Private company valuations are not transparent – there is no “public market” for private companies that provides any meaningful guide to the value of your business. What you read and hear in the press about stock market valuations and property prices is of very little relevance to the market value of your business.  

    5. Every private business transaction is done with a myriad of personal and corporate objectives in mind. The seller may be wishing to retire or not, the buyer may be empire building or may be able to gain additional value from the seller’s business due to their sales distribution or existing client base, etc. Therefore each situation is unique and external factors probably aren’t as important as you might think.

    6. Last and by no means least, life is too short to miss the lifestyle opportunities that a sale might bring to you. If there are other things you want to do with your life, get on with it.

The way to get the best outcome for a sale of your business is to present it professionally and to create competition amongst buyers - that’s far more important than trying to “time the market”.  If it’s too early to start a sale process, consider getting some help with improving the business and making it ready for sale when the time is right.

Need Advice?

To arrange a confidential,  no-obligation discussion, please contact us on:

+61 2 8386 3206 or info@fedcap.com.au


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