How to know if you’re ready to sell your business

By Michael N. Mercurio, Offit Kurman

The time is right to sell when the owner decides they want to sell, right? This statement is too simplistic. There are two factors to evaluate the timing to sell a business – external and internal considerations.

External considerations frequently are not well vetted. External factors include market conditions, such as the current receptivity to the owner’s business type. Other external factors that impact market conditions include taxes and access to capital. Too many owners decide they want to sell without understanding the external considerations that determine the optimal time to sell. The reason this happens relates to internal considerations. The owner determines they want (or need) to sell. This could be circumstantially driven (e.g., a family illness or death). It could be a mindset such as the owner being fed up with the current Covid-19 pandemic. Regardless of the particular issue, many times, internal pressures and decisions can overshadow the market.

An owner can manage their mindset by understanding the true state of their business and how it fits into the marketplace. In addition to the company attorney and CPA, the owner should get the insight of two other advisors. First, the owner should speak with an investment banker. An investment banker can provide market intelligence about market receptibility, as well as provide insight into how best to position the company for sale.

The owner should also speak with a financial advisor. A major component of any sale are financial considerations, and understanding the financial picture is key. The financial advisor should work with the investment banker to determine the market value of the business, in order to include the likely composition of sale funds. Also, the financial advisor should work with the owner on their personal financial situation. Understanding what the business is likely worth, coupled with the owner’s financial needs, empowers the owner to go into a sale informed and ready to evaluate offers from a position of strength.


 

Michael N. Mercurio, Esq.

Michael N. Mercurio, Esq.

GGI member firm
Offit Kurman, Attorneys at Law
Advisory, Corporate Finance, Fiduciary and Estate Planning, Law Firm Services
More than 10 offices throughout the US
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Offit Kurman is a full-service law firm with over 250 attorneys focused on representing privately held businesses. With deep experience and knowledge dealing with the issues that business owners regularly face, Offit Kurman’s team brings value to every relationship.

Michael N. Mercurio, Esq. is counsel on matters of corporate law, M&A, and transactions. Mr. Mercurio counsels entrepreneurs on business and commerce, including structure and ownership, management and control, financing and capital, expansion and acquisition, sale and transfer, and contraction.
 


Published: M & A Newsletter, No. 02 Spring 2022 l Photo: opolja - stock.adobe.com

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