Big Question #2: When Do You Want to Sell Your Business?
Does your client want to get out in 2 to 3 years or 5 to 10 years? Now is the time to help determine when to sell. The transition date might change later, but you need to establish a target so everyone knows what the plan is. As you get closer to that date, your client will have a chance to refine the plan based on external conditions at that time.When to sell a business depends on both internal and external factors. In general, encourage your client to consider:
Owner’s Situation & Objectives
- Current and future financial needs
- Family wishes
- Income tax and estate planning
- Emotional preparedness
- Plans for after the sale
- Performance and structure (operating and financial)
- Employee and minority shareholder needs
- Level of owner involvement
Economic & Industry Conditions
Keep in mind that it usually takes 6 to 12 months, or even longer, to sell a business to a strategic or third-party buyer after first contact with buyers. In many cases, the buyer will want the seller to remain with the business through a transition period, usually lasting between 6 months to 3 years. Help your client determine how long a transition period to expect so she can incorporate that time into the plan. You may want to involve an M&A advisor to get an opinion on these matters.