There is no set way to know when it’s the right time to close or sell your business. however, there are some factors to consider when making the decision.
Sometimes small business owners think that the only real option for them is to close down a business rather than sell it. For some small businesses where the owner is looking to wind down, this may be the only real option. For other smaller ventures it may be more prudent to try to find a buyer. An important fact is, “when you close a business you most likely will not get full value for the business assets.”
Some very small businesses such as a sole proprietorship may not have extensive assets or equipment, so when it is time to exit a one-person operation like a service business, handyman business, or a home based repair business, owners may think that selling the business may not be a viable option. The reality is that these types of operations are in demand, if only for their customer lists. Too often, entrepreneurs simply close the doors to their ventures. With the right help, many of these people should at least try to find a buyer, some will even find willing buyers.
Businesses that are declining
If a company is losing money and the prospects to find a buyer to take it over don’t look very positive, an owner can still seek out the services of a business consultant to discuss the options. Sometimes there are investors who are willing to take the risk of buying a venture that is in a challenging position financially, and then invest the capital required to turn it around. Also, some businesses have valuable inventory or equipment that other groups of buyers may be interested in. Some buyers see an opportunity to buy the business and manage its growth while keeping the current owner as an employee.
Businesses where a lease is about to expire
Sometimes the value of a business consists primarily of its location and access to its customers. If a business is run out of leased premises that drive significant revenue to the company, and the lease is not able to be extended or renewed, then this certainly poses a challenge for finding a buyer. Nonetheless, it would be wise to consider offering the Company’s goodwill, customer list and inventory to a complementary company or competitor who may find use for them.
Too often business owners are willing to throw in the towel when they can potentially get some real value for their businesses. It is important to remember that the value of a business is not simply the physical value of its assets, its location, or inventory alone. A business’s valuation is the present value of the future free cash flow it will generate to an investor, and that is truly a matter of perspective in many cases. Many times a younger buyer with more energy may see the value of relocating the business and growing the sales and profit. If you do have any questions on whether your business can be sold, talk to your business advisor, accountant, or solicitor before you decide to sell or close your business. They can offer professional advice about the profitability of your business, and the market trends for your industry.