3 Tell-Tale Signs It’s Time To Sell Your Business

A lot of hard-working entrepreneurs were raised under the presumption that quitters never win – that if they keep working hard enough, their wildest dreams will always come true.

That’s a really inspiring sentiment; however, it’s a total lie. The truth is, winners quit all the time.

Okay, so it can be pretty difficult leaving behind a business that you’ve built from the ground up – especially when it’s doing well.

Yet, if you want to go out on a high, you’ve got to know when to quit and hand the reigns over to somebody else. But when is the right time to jump ship? Have you carefully considered your exit plan?

Here are three tell-tale signs you should be looking to cut the cord and sell your business:

Poor performance

It’s all well and good to demonstrate a bit of optimism, but sometimes a company’s poor financial performance is simply too far gone to be salvaged. The best indicator of your company’s performance will be the level and rate of business debt.

You should be keeping an eye on your cash flow statements to develop an idea of whether your business is consistently falling further into debt. As a general rule of thumb, it’s time to shut down when your company’s current liabilities hit around 200% of current assets.

Generally, there’s no bouncing back from that – so you’ll simply continue to borrow yourself into bankruptcy. Make the sensible decision: sell or liquidate, and start over.

Shifting markets

Businesses don’t always decline because their owners are running them into the ground. You might be doing everything splendidly as a manager, but if market conditions are working against your company the chance of success will be severely limited.

For example, new mega-trends may render your business irrelevant or marginalize your mainline services. As consumer demand continues to evolve, this is happening in virtually every industry. Consider how speed-dating organizers are now struggling to cope with dating apps like Tinder. Uber has turned the private hire industry on its head. Pawn shops aren’t able to keep up with payday loan websites.

As your company’s leader, you’ve always got to keep a close eye on market trends. How are your competitors doing? Are there any industry-related apps on the horizon that could undermine your brick-and-mortar services?

Don’t be a reactionary business owner and wait for the walls to close in around you – if you can’t evolve your business to cope with shifting markets, perhaps you should think about selling and starting up a more relevant enterprise.

Soaring profits

On the flip side of the coin, a stellar financial performance very well might be another key indicator that it’s time to sell your business. Very few fledgling business owners are keen on the idea of dumping a money-making enterprise; however, it’s usually better for you and your business if you part ways when things are going well.

Like it or not, a lot of contemporary startup founders are not trained businesspeople. That’s a good thing, because the corporate world is always crying out for diversity. Yet every successful business will reach a stage in its evolution in which a lack of knowledge-based business leadership becomes a crippling roadblock. Sometimes, twenty-something programmers or blue-collar workers just don’t have the negotiation skills or strategic vision to keep the wheels of expansion moving.

Time To Get Out?

If you feel like you’ve taken your company as far as you’re able to take it, please quit. There’s nothing to be ashamed about, and it’s always better to go out on a high. Better yet, it will be a walk in the park to sell your company for a great price if profits are on the rise.

If you’re really hesitant to let go, you can always retain shares in your company or ask to stay on as a board member. In turn, you’ll still be able to play a mildly active role in the company whilst enjoying steady passive income.

By and large, knowing when to sell your business boils down to a matter of instinct. Most business owners know exactly when their company is stuck in a rut or fading into oblivion – they’re just too optimistic or stubborn to admit it.

Instead, you should strive to be a realist. If you feel like you’re holding your company back (or you’re simply ready for a change), don’t hesitate. Get your affairs in order, place your business on the market and start looking for a new adventure. You won’t regret it.

 

 

This article has been edited and condensed, originally posted here

Graeme Donnelly is the founder of 1st Formations, the UK’s top-rated company formation agents. Connect with @1stformations on Twitter.