The poet William Blake wrote,“What is the price of experience? Do men buy it for a song?”
Experience in business has value, but the longer your business is out there, the more risk you expose it to. This is why timing is critical when it comes to selling a business.
Changes in Attitude and Lifestyle
People’s attitude to risk changes as they get older, and this is also true of business owners. A natural conservativism seeps in and makes them more risk-averse.
The whole business of risk can become tiring, including having the time to fix issues and react to the threat of risk. This can then feed into thoughts about retirement and a change in lifestyle. Also, the fact that the business might feel more under threat adds to this sense of needing greater security, perhaps at a time when the business owner has a desire for more freedom.
When someone first starts a business, they are more likely to embrace risk as a necessary element in building business value – without exploring opportunities and taking chances the business is unlikely to grow.
The problem is, that while this helps build business value, when it comes to selling, the owner wants liquidity (cash), and if the business is run more cautiously by that time, it may be in danger of stagnating. So, less business value will mean less liquidity.
Caution can cause growth to slow, but a business that is growing, thereby demonstrating a better future, is of greater value to a buyer than one that is stagnating.
Timing is Everything
The time you choose to sell your business is vital. On one hand, you need to be aware of how your business has grown and what its current vulnerabilities are resulting from this. On the other, you want to ensure that you have built sufficient value in your business to sell it at the best possible price.
‘Going for a song‘ should be no-one’s ideal price, whether you are a business owner or acting on behalf of one.
Business owners, whether serial entrepreneurs or would-be retirees, should always be looking at exiting their investment because this is intelligent business thinking.
The key is in preparation. Structure your business in such a way as it can build and retain value. Monitor its financial performance and maintain its growth potential. Make it into a unique selling proposition by knowing what matters to your customers. But remember to get your timing right.
If you would like to build and retain value in your business, whether you are selling or not, please contact us.