There are many factors that determine best timing for selling a lower middle market business: the financial condition of the company, valuation, growth cycle, profit history and the current market.
Usually, the best time to obtain the highest price occurs when sales and earnings are trending upward. A solid earnings trend will enable a buyer to pay a higher multiple and still meet his/her return on investment criteria. A history of good performance also gives the buyer confidence in projected future earnings.
Value is dynamic and proper timing makes a big difference in the prices paid for business acquisitions. External factors such as the economy, industry trends, competition, stock market volatility, investor confidence, interest rates and geopolitical considerations are cycles of constant change that impact value.
Timing the Market for a Business Sale
So how should you start thinking objectively about the best time to sell? A good visual of right-timing would be to imagine the life cycle of your business plotted as a bell curve with the peak being the top of the growth cycle. The top is when you have reached the flat plane of growth…a sustaining mode. Buyers pay the best prices when they can’t see the top, when the curve is still climbing upward. Once the top is visibly breached, buyers may pass on the opportunity or may pay prices based on a downward trend and a higher risk factor. If you wait until your revenues are already sliding over to the downside of the bell curve, you have waited too long. Your business has already started to retire before you have. To get the best deal, you have to sell on the way up.
A Vibrant Acquisitions Market
The market for selling mid-market companies will remain steady as baby boomers continue to retire over the next ten years. So NOW is the ideal time to exit before the market becomes saturated with sellers all heading for the gates at the same time! Buyers in every category are looking for alternatives to traditional investment avenues. They are looking for stability, better predictability and control. Business acquisitions offer all of these and can also offer a better return on investment than other investment opportunities.
Thinking about an Exit? Please Contact us Today for a free no-obligation strategy consultation
CODY WEAVER –VP LISITEN ASSOCIATES BUSINESS BROKERS
“TOP BOUTIQUE BUSINESS BROKER OF THE YEAR USA “
for 2013, 2014 and 2015
by ACQUISITION INTERNATIONAL MAGAZINE.