May 2024 Newsletter
Top 20 Reasons for When to Sell Your Business
- The last time I wrote about this topic on when to sell your business was December, 2019. No one could imagine what was coming, but once again, timing is everything! Our firm did sell multiple companies in 2019 as I spoke to the CEOs of several of our clients about changes coming in the economy, valuations being very strong and some other specifics about these particular clients of ours. CEO Advisor, Inc. successfully sold these companies and all of these clients are extremely glad they sold in 2019 to this day.
- There are many different reasons why business owners choose to sell their business. There will come a time when selling your company might be the best decision you can make. Valuations have recovered from 2020 and are very high currently so this can be a tremendous opportunity for any business given a recession is long overdue, interest rates have hurt many companies and you want to sell when 1) The economy is healthy, 2) Your business is growing and sales are increasing, and 3) The CEO/business owner is healthy.
- As an expert in mergers and acquisitions, CEO Advisor, Inc. can help you to identify the optimal time to sell your business by discussing your situation, assessing your business, creating an exit strategy, and fully preparing you and your company in order to maximize your value and bringing your company to market for an optimal price and terms. Explore your options to sell as there are many different ways to achieve your business and personal goals.
- Below are the 20 reasons for when to sell your business:
- 1. Your Business' Value Has Improved Significantly. If you have considered selling and your business is now growing substantially, it can be the optimal time to sell. Selling on the way up is important so don’t wait until you subsequently have a flat or down year. Running a business is risky, and the bigger you get, the larger the risks you have to face. The value of your business is not liquid until you go through the transaction of selling your company and realizing the life-long opportunity.
- 2. Your Business Doesn't Have the Capital to Grow or Survive Long-Term in a Highly Competitive Market. Private small and mid-size businesses are highly illiquid and risky assets. Without adequate capital, you can't realize the full potential of your business. If you need more liquidity contact an M&A advisory firm to accomplish your goal of selling your business. This can be more advantageous today given the high valuations.
- 3. You Don't Have the Energy, Skills, or Capital to Grow the Business. One primary reason to sell a business is that you don't have the energy, time, experience, skills, and capital to take the business to the next level. A business should continually grow, and as business owners, there will come a time when you'll feel you can't generate substantial growth. This is the right time to sell your business and entrust it to those who have the skills and resources to grow it to the next level.
- 4. You Experience Fatigue or Lack of Alignment. If you got into running a business for the wrong reasons or the market opportunity has changed dramatically, you will eventually experience a certain level of exhaustion that will no longer be healthy for you physically, emotionally, and mentally. If you think that there is no quick fix for the burnout you feel, and you don’t see a feasible and economical way to increase sales, profits and cash flow, then it's time to sell and realize the opportunity of today's high valuations.
- 5. Your Business Has Substantial Sales Growth. One reason entrepreneurs choose to sell their business is that it has experienced substantial growth, but you realize the next leg of growth will be extremely expensive and take years. This growth is extremely appealing to buyers and you can gain a higher valuation from the sale. Some business owners just want to take a lump sum of money from the sale, and the best time to do this is when you can show substantial and consistent sales growth and earnings.
- 6. Your Personal Interests Change. After years of running and growing your business, you may conclude it doesn't feel as interesting and exciting as when you started it, and you're losing your passion for your business. This is a sign that you should consider selling it. Over time, it's normal for your interests to change, and you should capitalize on a well planned exit strategy to sell while you are relatively youthful and have the passion to do something new.
- 7. You Receive an Offer Too Good to Turn Down. We always recommend to fully prepare for a sale, and to conduct a competitive sale process to many targeted prospective buyers. But if a buyer presents an offer you can't refuse, it can be ample reason to accept and sell your business. Such a strong single offer out of the blue is rare, but if an offer is priced well above the market value for your business it may be the right time to pursue it. Again, your optimal method to sell is to prepare for and initiate a competitive sale process to many potential buyers using a seasoned M&A advisory firm. But, you never know when a serious buyer is going to knock on your door so be prepared to sell at all times.
- 8. You Want to Have a Fresh Start. Entrepreneurs have other motivations to sell their business and one of these is the desire to start a new business. Some entrepreneurs go into business because they want to start and build something bold and take a risk. This is what drives their spirit. If a business has already reached a certain point of growth and stability, some entrepreneurs just want to move forward, sell the business to cash out on their hard work, and start something new and exciting. Although you need to plan on staying up to a year or two with the buyer in order to get a deal done, starting the sale process now will get you to your goal sooner.
- 9. You Need More Time for Your Personal Life. At some point, as a business owner you will finally realize that running a business takes too much of your time. When the time comes that you will need more time for your family, to take care of your health and/or your personal life, then selling your business is a good way to do it. Be proactive and contact an M&A advisor as the process of selling a company is not trivial so you want to start as soon as possible.
- 10. Your Overall Exit Strategy Is to Sell Your Business. There are business owners who invest in building a thriving business to eventually sell later on at an optimal time for a huge sum of money. If a well-planned exit strategy is your purpose for starting the business in the first place, then it's a great reason to sell the business as soon as you have reached your desired growth and exit strategy goals. Having an exit strategy is critical to every business, and CEO Advisor, Inc. can help you to discuss your options, formulate an exit strategy, prepare for the sale of your business, and execute the sale process at the proper time.
- 11. You Want to Retire. The majority of entrepreneurs plan to sell their business as an exit strategy to provide a comfortable retirement. Most business owners plan to sell their business rather than keep it in the family or hire someone to run it in their place when they retire as this is very risky. The driving force for this stems from the lifestyle many entrepreneurs face and lack of savings for retirement. We work with many senior leaders of companies and our advice is always the same – sell when you are relatively young and healthy. If you are in your mid to late 60s now is the time to contact an M&A advisor.
- 12. You've Achieved Long-Term Financial Security. One reason to sell your business is if you have achieved a certain level of financial security from running the business and you want to step down and start a less stressful lifestyle. You don't need to fully retire to do this, as you can take on a temporary lesser role or a consulting role after an acquisition. There are often options such as a majority sale to a Private Equity firm, and CEO Advisor, Inc. has the contacts and expertise to manage this for you. At this point, you want to sell all or a majority of your business when valuations are peaking and sales are on an upswing.
- 13. You Feel Physically & Mentally Exhausted. As a business owner, you are most likely the hub of your business and make most of the major decisions. This can be physically and mentally draining, and the time will come when your responsibilities as a CEO or business owner will take its toll on you. If you feel physically and mentally exhausted running the business, then it's time for you to initiate an exit and sale process. Don't wait until an illness or excessive fatigue sets in before you decide to sell, as the buyer will typically expect you to remain with the company for 1 - 2 years.
- 14. You Want to Take Advantage of Low Capital Gains Taxes. The tax rate on capital gains is at an historically low level. This is one good reason to sell your business and enjoy low tax rates if you can achieve a straight stock purchase. If you are at an age near retirement, or if you have already grown and stabilized your business, then it may be best to sell your business and take advantage of taxes at such relatively low levels. Remember, there is always the risk of much higher tax rates and the Biden Administration has recently proposed 40%+ Capital Gains tax rates.
- 15. You've Become More Risk-Averse. Risk is essential to your business' continued growth. If you have become risk averse, and you get to the point that new opportunities invoke more fear than excitement, it is a sign that you should sell your business. Becoming too conservative means losing your drive to grow the business, and this alone is a good reason to sell.
- 16. Your Business Partner Wants to Sell. If your business partner wants to call it quits and move on, you have the option to either buy out his/her shares and own the business entirely, or just sell the business to a third-party. Most of the time, the second option is more prudent because you may not have the capital or want to borrow substantial funds to buyout your partner.
- 17. A Sudden Lifestyle Change Affects Your Business. CEOs and business owners need to understand that there should be a clear delineation between their personal lives and their business. If a sudden lifestyle change (like getting married, divorce, health issues, going back to school, or giving birth) becomes a conflict with your commitment to your business, then it's time to consider selling.
- 18. You Struggle with Poor Business Performance. Running a struggling business can be very stressful and demotivating. If you notice that your business' performance doesn't improve, even after you have exerted a lot of effort and invested many resources to grow the business, then perhaps it's time to consider selling it to someone who has the skills and money to revive and grow it. Just don't expect to secure an optimal sale price or terms.
- 19. Your Business' Industry Is Thriving or You See a Decline Looming. If your business' industry is thriving, it's a good time to sell your business. A business in a thriving industry will likely sell for more than if your business' industry is struggling. You can take this opportunity to sell your business while there are more acquirers interested in buying it at a good price. It's important to pay attention to industry trends, as it will benefit you when you decide to sell.
- 20. You Have Health Issues or You are in Your Late Sixties or Older (Possibly with Previous Health Issues). If you think your business has cost you your health, then it's time to seriously consider selling it. Facing serious health issues is one of the most common reasons why some business owners choose to sell their business. After all, it's best to prioritize your health, and capitalize on today's lofty valuations. Most importantly, be prudent and don’t wait too long to sell. Selling when you are elderly or have health issues is extremely risky and can be far more difficult.
- Bottom Line - When to Sell a Business. There will come a time when you will want or need to sell your company. The right time to sell a business is based on various reasons, such as economic conditions, industry trends, valuations, personal situations, and professional considerations, but most of all you want to sell when, 1) The economy is healthy, 2) Your business is healthy and sales are increasing, and 3) You, the CEO/business owner is healthy.
- This is one of the most important decisions you may make in your life. contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by mobile phone at (714) 697-3370 by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
Beneficial Ownership Information (BOI) Compliance Service Offered by CEO Advisor, Inc.
BOI Report Filing Required by the U.S. Treasury's Financial Crimes
Enforcement Network (FinCen) Department
The new Federal Corporate Transparency Act (CTA) requires all small businesses nationwide (with a few exemptions for banks, certain trusts, broker/dealers, etc.) to file business ownership information with the U.S. Treasury. The U.S. Treasury’s Financial Crimes Enforcement Network (FinCen) Department will manage the confidential database of BOI Report filings and is mandated with the enforcement of verifying all legal ownership and control of corporations, LLCs and other legitimate entities in order to identify the remaining illegitimate entities.
The BOI Report filing must be made starting January 1, 2024. The penalty for a fraudulent filing, or a late filing / no filing at all, is $500 per day (up to $500,000) and a maximum of 2 years in prison. Other than the few exemptions, all privately held businesses (corporations, LLCs, etc.) of $5 million in Revenue or less and 20 employees or less must file timely, accurate information or face the penalties above.
The BOI Report filing must be made starting January 1, 2024. The penalty for a fraudulent filing, or a late filing / no filing at all, is $500 per day (up to $500,000) and a maximum of 2 years in prison. Other than the few exemptions, all privately held businesses (corporations, LLCs, etc.) of $5 million in Revenue or less and 20 employees or less must file timely, accurate information or face the penalties above.
The U.S. Treasury’s FinCen Department estimates the BOI Report filing will take the average business 3 hours or more to file. Unfortunately, there are extensive regulations to understand and multiple instruction documents of 27 pages or more each so understanding and completing the BOI Report filing accurately and timely is not reasonable for most business owners. Additionally, this is a completely separate filing from any other State or Federal filing so a Statement of Information filing or your tax return will not satisfy this new BOI Report filing requirement. Also, amended BOI Report filings are required by the U.S. Treasury's FinCen Department on-going, and the regulations are changing regularly.
CEO Advisor, Inc. has researched this new Federal regulatory requirement of the U.S. Treasury in detail and can collect the needed information from you and prepare and make the BOI Report filing on your behalf in a fraction of the time and cost. We will also provide you with written proof of the FinCen/U.S. Treasury Receipt of the filing.
On-going, any change to your business ownership, executive team and business information will need to be refiled with the FinCen/U.S. Treasury as a change, update or correction to you BOI Report filing within 30 days of a change, which CEO Advisor, Inc. can also handle this amended filing for you quickly, easily and affordably as part of our annual service fee.
BENEFICIAL OWNERSHIP INFORMATION (BOI) COMPLIANCE SERVICE
Our affordable Beneficial Ownership Information Compliance Service enables your business to navigate these regulations, easily, accurately and timely comply, and provide the required transparency and accountability in order to avoid extensive fines and incarceration.
Our Annual BOI Compliance Service Includes:
- Expertise to make this process fast and easy- Secure, simple information collection- Required initial filing and amendment filings processed seamlessly- Email notifications and reminders to keep you up to date on future filing requirements- BOI Report filing support for the required initial filing and for on-going amended filings (involving changes to ownership, executives and business information)
Click here for more information on the service and pricing.
CEO Advisor, Inc. has researched this new Federal regulatory requirement of the U.S. Treasury in detail and can collect the needed information from you and prepare and make the BOI Report filing on your behalf in a fraction of the time and cost. We will also provide you with written proof of the FinCen/U.S. Treasury Receipt of the filing.
On-going, any change to your business ownership, executive team and business information will need to be refiled with the FinCen/U.S. Treasury as a change, update or correction to you BOI Report filing within 30 days of a change, which CEO Advisor, Inc. can also handle this amended filing for you quickly, easily and affordably as part of our annual service fee.
BENEFICIAL OWNERSHIP INFORMATION (BOI) COMPLIANCE SERVICE
Our affordable Beneficial Ownership Information Compliance Service enables your business to navigate these regulations, easily, accurately and timely comply, and provide the required transparency and accountability in order to avoid extensive fines and incarceration.
Our Annual BOI Compliance Service Includes:
- Expertise to make this process fast and easy- Secure, simple information collection- Required initial filing and amendment filings processed seamlessly- Email notifications and reminders to keep you up to date on future filing requirements- BOI Report filing support for the required initial filing and for on-going amended filings (involving changes to ownership, executives and business information)
Click here for more information on the service and pricing.
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