The most interest over the last weeks has been “When Is the Right Time to Sell?”
The answer to that question moves amongst how-long-is-a-piece-of-string and who really knows. Nonetheless, there are a few prime clues that I will explore with you over the next number of posts…
Through using the Hurst Partners sellabilityscore.com.au and getting into discussions with business owners, many of them believe the act of selling their business is similar to passing the baton in a 400-metre relay: once you’re finished running, you get to relax.
In reality, buyers may insist that you stay on for a transition period – anywhere from six months to five years, depending on the size of the transaction – during which time you continue to work in your business to help the buyer capitalise on the investment they’re making.
At some point in the process of selling your business, a prospective buyer will ask you – usually quite casually – “Why do you want to sell your business?”
Buyers ask THE question to evaluate how likely and willing you are to stay on or if you already have one foot out the door.
Obviously you don’t want to lie, but there is a right and wrong way to answer THE question. Answers like “I want to slow down a bit” or “I want to travel” or “we’ve got a baby on the way and I want to spend more time at home” communicate to a potential buyer that you plan on winding down when they take over. However, what they may want to hear is your intention to help them realise the potential locked inside your business.
Here are some suggested responses based on your age.
If you’re under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in merging your business with theirs:
“In order for us to get to the next level, we need to find a partner with more sales people, distribution, geographic reach, capital or whatever the partner brings to the table.”
If you’re between 40-55 years old, most people will understand the need to sure up your personal balance sheet:
“I’ve reached a time in my life where I want to create some liquidity from the value I’ve created so far and at the same time I want to find a partner who can help us get to the next level.”
If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business.
“I’m at a stage where I need to start thinking about retirement. It’s a long way off yet, but I want to be proactive.”
Rehearse your answer to THE question so it becomes a natural response when you are inevitably asked THE question.