Is It too Late To Sell My Business?

You’ve been running the business for years, and you know that you won’t be running it forever. But, sitting at the back of your mind is the question “is it too late to sell my business”.

You worry that you should’ve started thinking about it sooner, and the window is closing, or it’s already closed.

What closes the exit window

Most owners assume that the window closes because of their age, because they’ve been running the business for too long, or that the business isn’t big enough. None of these things are a factor.

The window only closes in two situations.

The first is an obvious one. If the business is in decline and cannot be turned around. The usual warning signs are falling revenues, shrinking profit margins, and no steps have been taken to show that recovery is underway. A business that has been declining for three or four years, and that has no path to recover is hard to sell. It’s not impossible, but it will be a lot harder.

The second is when the owner decides to sell quickly, due to a health issue, a family matter, a partnership dispute, or a key person who decides to leave at the wrong moment. These create a deadline, meaning that the leverage and the power, shifts to the buyers of the table. Distressed sales usually do not work out well for the seller.

Those are the situations that lead to bad exits. The business was worth something, but because the preparation that was needed didn’t happen, and time ran out.

The difference between Late and Too Late

For most businesses, the window is still open. That’s not just comforting words to say for the sake of it. It’s statistically true. The majority of business owners who feel like they’ve left it too late haven’t left it too late at all. They may have left it later than ideal, but that’s a different thing.

Later than ideal means that the work ahead needs to be done quicker. It means some options, that would’ve been available, are no longer available. It means you’ll be doing in eighteen months what would’ve been done comfortably in three years. But this doesn’t have to mean that your window has closed.

The best exits have a price that reflects what the business is worth, going to a buyer who is a good fit, and have a clean handover. These exits can take two to four years of preparation. Two to four years of making changes whilst the business continues to run. If you want to sell and be out of the business in the next six months, you’ll have a harder time ahead. This does not mean you’ll have a bad exit, but there’ll be a lot of work to do.

Three questions to work out where you stand

You need to be clear on what your actual position is, rather than where you assume you are. These three questions will give you a good idea.

Is the business still growing?
Not growing dramatically, but has the revenue improved over the last two to three years? A business that can show growth is worth more than a business that remains static. If sales have stalled, or are in decline, getting the business growing again has to be your first priority.

Do you have at least two years?
Not two years until you want to exit, but two years until you need to exit. There’s a difference and if the answer is yes, the work is manageable and it can be done at a sensible pace. If the answer is no, then the work is more urgent, but it still needs to happen.

Are there things you already know need fixing?
Most business owners have a list of things that would need to be sorted before a the business can be sold. This can be owner dependency, client concentration, tidying up the financials, or writing down systems that only exist in people’s heads. If that list exists, and nothing has been started, that tells you where the work needs to begin.

What to do depends on where you are

If your business is growing, and you have plenty of time, you’re in a strong position. By starting now you have enough time to do everything properly. This scenario gives you the best outcome, because you have the time to put the right things in place before putting the business on the market.

If growth has stalled, but you have time, the priority needs to be getting the business moving again. Once this is happening, you can start the other work to prepare it for sale. A business that can show a recent upward trend in revenue and margin, is a different proposition from a flat one, even if the underlying numbers are similar. Buyers will look at trajectory, as much as they look at history.

If time is short, and there’s a lot of things to change, things get harder, but they still need to happen. Avoiding the position the business is currently in won’t improve the situation, and it will need to be resolved further down the line. You need to be clear on what’s achievable in the time you have available, and what the realistic options are. This is better than waiting for the decision to be made for you. If you’re in this position, How To Document Business Processes is worth reading. This covers the areas to focus on first when time short.

Clean Financials For A Business Sale is also worth a read. Sorting the financial presentation of the business is one of the things that takes longer than owners think. It’s also one of the first things a buyer will ask for.

Is it too late to sell my business?

The worst exits are the ones where the owner waited until circumstances forced their hand, and they ended up with no time to prepare. This meant they had no leverage, and limited choices. This is the scenario you need to avoid, and the best way to avoid it is to start the conversation now, and to use the time you have.

If you feel like you’ve left it too late, you’re usually in a much better position than you expect. The business you’ve built has value, so the question is whether there’s enough time to present it properly. In most cases, there is. But that time gets used up quickly once you decide to do nothing with it.

What a buyer sees when they look at your business is covered in What Buyers Look For In A Business. Reading that alongside this article gives you a clear picture of both where you are in the timeline and what you’re working towards.

Where do you feel you are in that window right now?