Tom McKaskill

Your business is your life, so if you’re not in a business that you enjoy, you are wasting that life. If you need to make a change, make it!

When should you sell your business? Not when you think

I am often asked ‘When should I sell my business?’ Usually people want me to give them some highly professional (probably), theoretically reasoned answer based on the state of the sharemarket and their industry – almost as if I could predict what the Reserve Bank is likely to do two years from now.

While I am sure there are advisers out there who would be willing to speculate on such an alignment of stars and planets, I have come to the conclusion that selling a business has more to do with the interests and motivations of the entrepreneur than the state of the business.

Assuming that the business is making a profit and growing, and has reasonable potential, when should you sell? One would hope that the value in the business is growing with increased profits, however, value in a business need not be based on profits.

For example, when you sell based on strategic value, the value is determined by what a large corporation can extract from your underlying assets and capabilities rather than on your current or potential profits. Thus your current revenue, profits, staff numbers and customer base may be irrelevant in terms of extracting the premium price. In fact, value may be lost by getting bigger or delaying the sale.

On the other hand, a conventional business does generate value through increased profits, but the right buyer who can exploit the business much better than the current owners may be willing to pay well beyond a conventional EBIT multiple to have that opportunity. It might be better to sell now to someone who can better exploit it than you.

Clearly the future cannot always be predicted with any accuracy. Look at the likes of Ansett, Enron, Arthur Andersen and so on. Who would have predicted their demise?

Instead, focus on your own motivations and potential. Is this the right business for you or should you put your effort into a different business? Could someone else take your business to a new level and so provide a better workplace for your employees? Do you have passion for a different type of business? Are you physically and mentally able to continue with the business or would you be better off getting out of this one and reshaping your life?

Ask the personal questions first. What do you want to do with your life, and is the business giving you what you want? Would you enjoy life better if you took the money and did something else? Where is your passion and your interest and are you following that in your business?

For entrepreneurs, business is their life. Find a business that you have a passion for and then spend your time there; don’t waste your life and your passion where you don’t have fun.


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