Are you trying to time the sale of your business so that you exit when both your business and the economy are peaking?
While your goal to build the value of your company is admirable, here are five reasons why you may want to sell sooner than you might have planned:
- You May Be Choking Your Business
When you start your business, you have nothing to lose, so you risk it all on your idea. As your buisness grows, you naturally become more conservative, because it actually becomes worth something. For many of us, our company is our largest asset, so the idea of losing it on a new growth idea becomes less and less attractive. We become more cautious and may impede our company’s growth.
- Money Is Cheap
We’re coming out of a time of very low interest rates. Financial buyers will likely borrow money to buy your business so—at the risk of over simplifying a lot of MBA math—the less it costs them to borrow, the more they will spend to buy your business.
- Timing Your Sale Is A Fool’s Errand
The returns on most financial assets are correlated, which is to say that the value of your private business, real estate, and a Fortune 500 company’s stock all move in roughly the same direction. They are all now booming. However, you’ll have to do something with the money you make from the sale of your company, which means you will likely buy into a new asset class at the same elevated valuation at which you are exiting.
- Cybercrime
If you have moved your customer data into the cloud, it is only a matter of time before you become the target of cybercrime. Randy Ambrosie, the former head of 3Macs, an investment company that manages $6 billion for Canadian families, decided to sell in part because he feared a cyber attack. Ambrosie and his partners knew they had been under-investing in technology for years, at a time when cybercrime was becoming more prevalent in the financial services space. They decided to sell the firm to Raymond James because they realized the cost to stay ahead of hackers was becoming too much to bear.
- There Is No Corporate Ladder
In most occupations, the ambitious must climb the ladder. Aspiring CEOs must methodically move up, stacking one job on the next until they are ready for the top post. They have to put in the time, and succeed at each new assignment to be considered for the next rung.
By choosing a career as an entrepreneur, you get to skip the ladder entirely. You can start and grow a company, sell it, take a sabbatical and start another company and nobody will miss you on the ladder. Your second (or third) company is likely to be more successful than your first, so the sooner you sell your existing business, the sooner you get to take a break and then start working on your next.
You may want to time the sale of your business so that the economy and your company are peaking, but in reality, it may be better to sell sooner rather than later.