A fact that every business owner needs to accept is that at some point they will exit their business. This may be something they make happen, or may be something over which they have no control.

Exiting your business starts with the decision to exit. That doesn’t mean you are deciding to go now. It is at least the simple realisation that you want, at some point, to move on.

We tend to get overly focused on that endpoint transaction – in most cases the sale. We need to be thinking well in advance of this final act to prepare our business for sale.

When Should I Sell My Business?

This is one of the most common questions I get asked. In most cases, the business owner is asking about timing relative to annual cycles or longer business cycles. I have previously covered this topic in an earlier blog: Business Cycles and Business Exits.

But there is another way to consider and answer this question: How do I know it is time for me to exit? This is a more personal question. To work through this question, you need to explore your motivations. First, you need to think about what you enjoy about working in your business, and explore the financial realities of what it gives you.

Then, you need to think about your motivations for leaving. Specifically, what will you do after exiting? You are looking for something that will give you purpose and drive; more than something to look forward to after selling. You need to identify something that pulls you toward the sale option. Something better than owning your business. This not only motivates you to plan your exit, but also keeps you on track through the process, and in whatever comes next.

Once the latter eclipses the former, you are ready to sell. But you don’t want to wait until you are burnt out and jaded to be thinking about your exit. That needs to start way earlier.

After The Honeymoon

“Start with the end in mind.” This is a common piece of advice to people starting or buying a business – plot out a timeline to when you plan to exit. You may measure that timeline in years, either a length of ownership, or the age you will be when you intend selling. Some base their timeline on key milestones. They started their business when they started their family, and plan to return to the corporate world as soon as the youngest is 14. It is very common to hear business owners frame their timeline in terms of a target: ‘I will sell when the business is worth $2M.’

These are common aspirational targets, but largely ignore the realities of life and the business world.

And it is actually very rare for new business owners to think about exit. And they probably shouldn’t so early in their business ownership story. They should get to know their business better first.

In the vast majority of cases, most business owners set no exit timeline. They keep working in their business until it stops being fun. They get frustrated by the constant risk they need to manage. They get anxious about ensuring they have enough in the bank to cover the next payroll. They get annoyed that their employees seem to work fewer hours, have less responsibility, and higher earnings than them. In many cases, they snap. They can’t take it anymore, and they want out. Immediately.

So, when is the best time to be thinking about exit? Ideally, well before you snap. Selling immediately risks a poor return on your effort. To get your business in proper order, you need at least a whole financial year to get things in place, and more time than that if you can. A three-year run up is about right, if you have the patience.

I suggest there is likely an earlier trigger event to sent this all in motion, however: the end of the honeymoon. The first time you feel that annoyance, frustration, or anxiety. The first time you seriously don’t want to get out of bed to go to work. The first time you can step back without emotion and see that your ownership is finite. That’s the best time to start working on your (inevitable) exit.

Very few business owners can properly think this through while they are still madly and deeply in love with their business. They are still in the honeymoon period.

Business Planning with Value Drivers

A cornerstone of my advisory practice is for clients to embrace their business’s value drivers. Value drivers are those facets of the business that increase the value of the business. Recognising the specific parts of your business that can drive value is critical. These drivers can vary by industry and jurisdiction, although many are quite common.

A focus on value drivers is good business. More importantly, value drivers are the things you should be doing anyway to have an effective and successful business. This isn’t a matter of instead of; it is simply having a different prioritisation. And those priorities are simply putting yourself in the buyer’s position. What makes your business more valuable to a buyer is also a good practice for you.

I have written more on business drivers in these two posts: The Importance of Business Value to Business Owners, and Business Value and Strategic Decision Making in Small Businesses.

So, when is the best time to sell your business? When it is ready to be sold, when you are ready to sell, when you are motivated to exit, and when you want to exit. Don’t wait until you have to sell the business. Build your business around your key business value drivers, and you will be ready to sell anytime you want to exit.

If you have passed the end of your honeymoon with your business, it’s a good time to be thinking about your value drivers and exit plan. Let’s chat.