This article are provided for information purposes only, and are not intended as legal advice.


When do you sell your business and retire?

July 27th, 2009

Selling your business and retiring is a hard decision to make.  If an entrepreneur sells a business, he/she will start another or buy another business for sale, maybe not immediately, but they will not stop.  Entrepreneurs can slow down but I have never seen one stop totally, some may take one, two or three years off before they become board of not doing anything.  Entrepreneurs often do not have hobbies, they do not know what to do after they retire.  I have talked to many entrepreneurs who have made substantial profits and retired very young but after one, two or three years, they are tired of taking the kids to school every morning, they are bored and do not know what to do and they get rejuvenated when they are planning deals for the future.

 

Others do want to retire.  Many business owners are slow to decide when they want to retire but once they make that decision, they want to immediately.  These are the business owners who do not have any succession plans, no family members to take over the business, no key personnel.  They want out tomorrow but it could take a year before they find a buyers for their business and then they have to close the sale of the business. Remember, it takes sometimes two months after you find a buyer to prepare the letter of intent, go through due diligence and then have the lawyers prepare a purchase and sale agreement for the business.   In that final year, the owner may not be too motivated, sales could drop, staff may not be too motivated which makes it harder to sell the business.

 

Large companies plan on new strategies before their products peak in their life cycle.  Planning to sell your business when the sales of your products are dropping is not good, you rush to get a replacement products, planning while your sales are increasing gives you time to plan your exit and timing of your retirement.  If you time it right, you get out at the peak and not when business is dropping.  If you wait until after your business has peaked, it is more difficult to sell your business compared to a company which has a growth track record, sales are increasing yearly therefore there may be more opportunities for the business to expand under new ownership if the new owner believes that they can take over and take the business to the next level, something that the old owner may not have wanted to or had the ability to do.  Businesses which have considerable upside are much easier to sell than a business which has passed its peak and are declining.  These type of businesses appeal to a person who is looking for a job rather than an entrepreneur who is looking to expand the business.  Businesses experiencing growth often sell for more than businesses which are stagnant because there is little opportunity to grow the business.


Filed under: Sell a business — Gary Landa @ 9:18 am


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