I'm asked at least once a week what the right criteria are for choosing to sell a business. Even within our current client base, which has companies valued all over the map, from $1m to $50m+ there are similar questions and concerns around liquidity and timing.
Liquidity: 10 years ago founders of small companies had limited options for liquidity. Today there are many options for full or partial liquidity from the startup stage of a business through the growth stage, all the way to IPO. Knowing when to diversify as an entrepreneur is a tough decision.
(This section deserves it's own post and I'll try to follow up with one soon.)Timing: Selling a company is not unlike selling stock in a market. There is uncertainty around market conditions, competitive pressures, and the future. Most financial advisors will encourage you to plan and not try to time the market. There is a tendency to not want to sell a business when it is growing and in a good market. The implications are clear. When growth slows, your price decreases. If the market slows, the price will also decrease as the market for your firm gets smaller.
It's difficult to know the optimal time to sell a company. During liquid markets such as this one, companies with 2-3 year profitable growth have an outstanding opportunity to structure a variety of transactions. Exploration of the options is the only real way to understand how your companies story fits into the broader deal market.
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