As we embark on addressing the  question, Is Your Business READY for Sale?, let’s talk about the ideal time to sell a business. As it turns out, this is an important question. The ideal time to sell a business is when the following stars are in alignment.

• The Company is READY. Things are really looking good at your company. Earnings are growing and margins are expanding. You’ve just introduced a new product that is killing it in the market. Your management team is solidly in place and your successor is in training. The balance sheet is reasonably financed and there are no excess, strange, or quirky assets on the balance sheet. There is some excess manufacturing capacity, so there’s no need for major capital expenditures to facilitate growth over the next couple of years. In short, things are humming.
• You (and maybe your fellow owners) are ready. On the personal side, your will is in place and it says what you want it to say. Your estate planning is in place, and your spouse and kids know what will happen if anything happens to you. Your health care power of attorney is signed. On the business side, you have successor management identified and in place. When the company is sold, you have the stock where it needs to be to accomplish your estate planing goals. You are sure you have enough assets, both from prior savings and diversification, and from the proceeds of the sale, to live in the style you desire for the rest of your life. Importantly, you are ready psychologically for your life after the sale of the business and have arranged for or have a good idea of what you will do next. In short, you are ready if your business is sold.
• Your industry is hot and maybe consolidating. Your industry is perceived as an attractive place to be, both for financial or strategic players already in it and for new strategic entrants, who find the prospects for growth and profitability to be attractive. Things are happening and exciting in your industry niche. Rising tides, after all, lift all boats.
• Financing is relatively inexpensive and readily available. The lending markets are favorable for transaction financing. Lenders are anxious to make loans to finance the purchase of good companies. Competition among lenders is helping not only to hold borrowing costs at reasonable levels, but also to loosen covenants and restrictions a good bit. Your likely buyers will find favorable financing when they are looking at your company.
• Conditions in the stock market are favorable. Public companies tend to be more acquisitive when market conditions for their shares are favorable. They can issue stock in acquisitions or it is easy to raise cash. Favorable market conditions also tend to encourage transactions volume,
• When irrational buyers abound. I’ve joked on numerous occasions that nearly everyone wants to sell to a strategic buyer. But when you really need them, they can be tough to find! What owners would really like to find is an irrational buyer, or one who sees something in a business that no one else sees, and prices a deal seemingly irrational to everyone else.

In 1969, the 5th Dimension recorded a major hit, The Age of Aquarius. The first verse goes like this:

When the moon is in the Seventh House
And Jupiter aligns with Mars
Then peace will guide the planets
And love will steer the stars

I liken the ideal time to sell a business to the near-perfect world described in the song. Many companies are not READY for sale. Many business owners are not ready for a transaction. Not every industry is hot all the time. Financing is not evenly available, and sometimes it is mostly unavailable. The stock market has its ups and downs and irrational buyers are discouraged when great conditions are not present.

The fact is, ideal conditions for business sales do not occur all the time. The perfect storm described above may never fall into place for your business. So what’s a business owner to do? Let’s explore the circumstances under which business sales often do occur as we look at the question of potentially selling a business. We’ll shed some light on the question, Is Your Business READY for Sale? in subsequent posts. Stay tuned.

In the meantime, be well!

Chris