Is 2022 the Year to Sell Your Business?
Mergers and acquisitions are at an all-time high. New business applications surged by 92% at the beginning of the pandemic, while 30,640 deals totaling $3 trillion closed in 2021 alone.
Should you start thinking about selling your business?
3 Reasons to Consider Selling This Year
According to Inc., there are 3 main reasons to consider selling your business in 2022:
Businesses are selling at record prices.
More people are pursuing entrepreneurship.
Sellers have a market advantage because many have held off going to market during the pandemic.
Incredibly, the median sale prices of businesses increased by 16% during 2021, with sold businesses having a 9% increase in revenue and an 11% increase in cash flow. Buyers are especially willing to pay a premium for pandemic-resistant businesses, such as e-commerce, transportation, HVAC, and beverages.
Are You Ready to Sell?
At Raincatcher, we encounter this question with nearly every business owner who reaches out to us. On the one hand, they’ve poured blood, sweat, and tears into building a successful business. On the other hand, they see that now is the time to capitalize on a favorable market.
Many business owners think they are ready to sell but make critical mistakes that cost them the best and highest closing price. If you are a business owner considering shopping around for buyers, there are several key business items to set in place before you start the process.
The Top Missteps When Going to Market
Asking price–If it’s too high, you won’t get any leads. If it’s too low, you may scare off potential buyers who think they may be taking on too much risk.
Poor Financial Records–Are your books in order? If not, sloppy financials will delay a sale of a business and prevent attracting strategic buyers.
Representing Yourself–While it may seem to be cost-effective to cut out “the middleman,” representing yourself in a sale usually results in poorer quality buyers and deals.
Checking Out of Your Business–Another reason to not represent yourself? You’ll burn out during the selling process, which is all the more reason to check out of your current business. If your business starts to backslide, that will not be attractive to buyers.
Choosing the Wrong Buyer–Believe it or not, you can get a favorable offer from a buyer that can quickly run the business you built into the ground. Determining the best fit means finding the right chemistry with prospective buyers that will ensure future growth of the business.
Planning Your Best Exit
Timing is Everything
As fellow entrepreneurs, we at Raincatcher understand how close a business owner can get to their business. Yet, the ultimate test of your business’ success can be found in a simple question: Would someone want to buy your company? And if so, how would they value it? Once you feel confident that your company is indeed someone’s valuable future purchase, understanding the right time to exit your business is the key to its successful sale. You may feel that it’s time to move on, but the truth may be that it’s time to take a step back to reframe and rebuild the way you create value for your company and yourself.
Are You Exit Planning or Value Building?
While many people call this process “exit planning,” we refer to the process as “value building,” which requires a slight shift in mindset. Rather than thinking about your company as something you’ve created and grown over time, you can learn to look at your company as an asset. And just like any other asset, your company should be one that you want to see grow in value over time. Your efforts to build a more sellable company will create a more valuable, profitable, and efficient company that will give you the freedom to have options and make choices about your future, unencumbered by the stress of weakening financials or day-to-day operations.
The Value of a Business Growth Coach
At Raincatcher, we have an in-house business growth expert who works alongside business owners as they embark on their value-building journey towards a future of increased profit and freedom.
Raincatcher Director of Business Growth, Susan Frew
Our business growth team has more than three decades of experience growing, buying, and selling companies and also has an equal amount of entrepreneurial experience. We can help you make the objective decisions that every passionate entrepreneur struggles to make, and help coach you through different ways to optimize your company’s value along your M&A journey.
To learn more about the M&A process with Raincatcher, contact us for a free valuation.