When is the Best Time to Sell Your Business?

This question is comparable to asking when is the best time to ask for a credit line or loan from your banker. That answer is when you don’t need it, and you are flying high. The same holds true when selling your business. Going to market with your business at a peak, and when time is not of the essence, gives you time to plan and provides maneuvering room if needed.

One of the important elements that will allow you to get the best price possible is to have clean accounting records. The term “clean” means reporting all income to show the maximum profit, and minimizing non-business expenses being run through the business. This maximizes the owner benefit, or seller discretionary income, as it is known.

Consider that you are paying an effective tax rate of 20%, which you save with unreported income or running excessive non-business expenses through the business. Compare that 20% tax saving to the 200% to 300% you would enjoy in a higher price as a result of the increase in profit. This increased profit comes from increased sales and lower expenses.

When there are excessive or abusive non-business expenses, it raises an issue about the integrity of the accounting records. Trust is a very important element in getting the best price possible. Additionally, banks will not fund a business with excessive non-business expenses, particularly if these are not easily identified as line items. At year-end, it is easy to identify these expenses, and your accountant can change them to distributions as compared to a business expense. Not surprisingly, for every dollar saved in expenses or increase gross sales, the amount goes to the bottom line and is worth two or three times as much to you in the sales price.

With a optimistic view of the economy for now and relatively low interest rates still in place, this is the time to sell. It remains a seller’s market with very limited quality opportunities available.

As a seller or a buyer, if you would like a confidential conversation about how to prepare, please contact me on my cell, 954-579-4687, or by e-mail at bobd@dolansales.com. My LinkedIn profile is at http://www.linkedin.com/in/dolansales.