In the Last century, Indian Businessmen used to start and run the Business for life, M&As were limited to and done only around Large Corporates. The Businesses were passed on to the next generation, it did not matter where their interest lied. With the opening up of the economy, liberalization and then ushering of the new Information age, M&As are now happening even in SME space. More and more entrepreneurs are now looking to either buy or sell businesses.
So many entrepreneurs today think of selling their business, making a right exit and then enjoying the fruits of their labour, or even starting something new. Entrepreneurs though struggle a lot in understanding or determining when is the right time to sell their business. When should I sell? When should one sell? Remember, in business timing is everything.
We think the decision to sell an SME Business, is a combination of Personal & Financial timing. Lets look at some of the key factors that determine if you are ready to sell the business, starting with Personal first and then moving onto the Financials.
- Succession Planning: If you are above 50 and don’t see a successor in your family, or within the organization, then it makes sense to exit. At 50, you still have the age on your side to handhold the next owner for 4-5 years (which is highly essential for an SME business M&A). Also, you can actively look for a buyer, the older you get the lesser your negotiating power.
- Passion: Are you still passionate about running the Business? Do you feel thrilled? Do you love to go to work every morning? If answer to these are in the negative, then probably it’s the right time for you to exit the Business and move onto something else in your life.
- Goals & Needs: What are your Personal long-term goals and needs, is the current business fulfilling them, or is there a need to move to something else.
If you are ticking one or all of the above, then Personally it is the right time for you to sell your business, but beyond the Personal parameters, you also need to look at the Financial ones
- Reached a Peak: Your business has done wonderfully well, Sales are up, Profits are up, everything looks absolutely wonderful. But if you feel it’s the peak – then this is the BEST time for you to sell.
- Irresistible Offer: You are getting a too good to be true offer. This maybe once in a life time offer, and Personally also you would like to do something else in your life – then it is time for you to exit and sell your business.
- No growth: Your business is not growing anymore; however hard you try. There can be numerous reasons for the same, but if its not growing, or growing at a rate to just cover inflation – then it’s the right time to sell, though the valuations are not going to be so bright for a business that has not been growing.
- Will someone buy me: What are the chances, that I shall be able to sell my business? If you feel, that by fixing couple of things in your business, you can find the right buyer – then fix those issues and then go out and look to sell.
- Cant get along with partner: A messy board, partner relationship is a recipe for disaster. Not only does the Business suffer, but individually each Partner suffers too. Then it’s the right time to either exit your share or sell the Business Completely.
Selling the Business is a complex affair, and requires lot of planning and immaculate execution. Please write to lalit.chetani@ontrustcap.com for further information or advisory on selling your Business.