Business Brokers are frequently asked for advice on when to sell a privately owned business. With rare exceptions, the core issue is really a lifestyle decision and not necessarily a financial one. For most business owners, operating their business is their life, and if they enjoy it and bounce out of bed every morning anxious to face the day, then it probably isn’t the right time for them to consider selling.

There are SOME exceptions to the above which include:
1. Someone offers you substantially more than what the business is really worth
2. You have reason to believe you have significant health issues ahead of you
3. Your spouse hates the business and wishes that you were no longer involved in owning it
4. You are ready to retire or pursue other passions

Let’s examine each of these:

1. One of the prime reasons this rarely happens is that very few business owners have a realistic idea of what their businesses are worth. What? You don’t know the value of your business? You don’t have a written Business Plan? You haven’t done any Estate Planning? That is bad news for you and your heirs, but great news for your competitors, the IRS and all the lawyers that will end up getting involved before all is said and done! How do you avoid these pitfalls? Many qualified business brokers will provide you with a fair market valuation at little to no cost. Having a Business Plan is typically a function of creating the time to do it. As to the format, most business brokers, community colleges and/or libraries or business books can teach you with little to no cost. You can get an inexpense start on estate planning by attending seminars in your local area and then picking a competent and low cost individual who can give you guidance.

2. Most privately owned businesses lose 50% or more of their value when their primary owner becomes incapacitated or dies. Obviously this is an insurable risk; however, if you have early warning signs or you might be in a high risk category, you should proceed accordingly. What?? You don’t get an annual physical?? That is the equivalent of trying to run your business without either financial statements or getting any professional advice. While you might not be motivated to lose 50 lbs, at a minimum you should know the facts about your health and what you can do about it.

3. Quality of Life is basically the name of the game, and if your spouse is not on board in the ownership of the business, you really want to give the idea of selling a great deal of thought. The old saying is that “Happy wife, happy life”

4. Getting burned out or lacking any challenge in your business means it is time to start thinking about hanging it up (if your net worth will accommodate retirement) or selling and doing something else. Those who live their lives doing something that they enjoy outlive those who don’t! The trick is to not start coasting in your current business before transitioning it to a new owner or else you might decrease its value.

The Best Possible Advice: Enjoy what you do and if the time ever comes that it is no longer fun, plan to either change how you approach your business or start to plan for a transition of ownership. If your plan is to transition ownership, plan it well ahead of schedule and carefully select a team that has your best interests at heart.