One of the most important things is timing the business sale for maximum value, yet one of the most overlooked. There are a number of cycles, which your business will be in the middle of:
- The Calendar Cycle
- The Industry Cycle
- The Economic Cycle
- The Regulatory Cycle
- Your Lifetime Cycle
It is important to sell, as much as possible, at the right time in each of these cycles.
The shortest cycle is the calendar cycle. What time of year should you sell? You will get more for your business if you sell coming into a top trading period e.g. coming into Christmas with a retail business. You will get less coming out of summer for a beach side business.
For many years, people have been predicting the death of the video store. However, it keeps on keeping on and is always coming up with new ways to revive and regenerate trade. Music shops have closed as a result of the easy availability of music online. Could we have seen that coming? Should we have seen that coming? Right now, retail businesses are suffering an onslaught from online businesses who don’t pay rent and have less overheads generally. How can you take advantage of this? How can you protect yourself or even capitalise on it if you have a retail store? What will retail trading look like in five years, ten years’ time? Are you under threat? What precautions can you take to make sure you remain relevant and in demand?
This can be the longest of the cycles and is probably easier to pick. We can’t necessarily pick the beginning of the boom or bust however we do know when we are in each of these economic states. In boom time you should realise it won’t last forever and in the down part of the cycle you should realise that stronger trading conditions are ahead.
Businesses benefit or suffer from government legislation and regulation. Governments can affect business by virtue of general legislative activity, including monetary and fiscal policy and other macro economic moves. Governments can also affect businesses by industry specific initiatives. Industries affected in the past 20 years include hotels, news agencies, childcare centres, employment agencies, mortgage brokers, franchises, building companies and many other businesses. Governments at all levels, Federal State and Local can have an impact. If you are a member of an industry association you can have early warning and also a chance through your association to shape the policy.
Your Lifetime Cycle
This is the hardest of all cycles to pick. You really want sell your business when you are just at or below your peak. Because you can’t time it always to perfection you want to make sure that you sell it before rather than after your peak. The last thing you need to be doing is selling your business when it’s on the slide. People generally know when in the life of their business it is the time to sell. They stop enjoying the business. They look for other people to blame. They’re not performing as well as they used to. If you are lucky enough you will have the luxury of choosing your time of sale and that will coincide with favourable conditions according to the other cycles mentioned above. You may not get it right, but if you aren’t thinking about this very point you could very easily get it disastrously wrong.