Why a Great Year Makes it the Best Time to Sell

Hey ,

Congrats!

You've made it to Week Three of our series on making your business sellable. Last week, we had our first case study of entrepreneurial exits. This week, we're going to explore why you should act contrary to intuition and position for a sale when you don’t need to.

Picture this: Your business is experiencing exponential growth, soaring to new heights with each passing quarter. It's an exhilarating journey, but amidst the excitement, there's a crucial question to think about: who is this news aimed for?

It’s not your customers; they’re getting the same or even strained services, and you need them less individually since each is a smaller percentage of your revenue. 

It’s actually a business buyer that would be most interested in this story, because there’s a growth narrative here.

It’s a natural instinct for people to try and hold onto something when it’s doing really well. You feel like your hard work is paying off, and now is the time to run the style of business you’ve always wanted to own. But this is actually a mistake, a common flaw of human psychology, and people wait until their growth phase has ended before they look to exit, making it a much less attractive offer. This is the main reason why 90% of businesses that try to sell, don’t. 

You're ignoring the opportunity for a great exit based on projections because you think you should be doubling down on what works, whereas you should be using your momentum for exit equity. 

Think of it this way, you might be thinking of holding onto a couple more years of profits, but if your growth story adds 1-3x on your multiple, those years of value are compressed into a single deal. A successful year demonstrates several key factors that make your business more attractive to investors and acquirers:

1. A Proven Model: With a great year under your belt, you've validated your business model. It seems like reduced risk for potential buyers.

2. Higher Multiple: A growing revenue stream can significantly increase your business's value, making it more appealing to investors and acquirers.

3. Scalability: A successful year often means which enables easier scaling and growth. Refining your operations, processes, and systems is exactly what a buyer wants to do with an investor’s mindset, so let them do that and they feel like there’s clear value add

Takeaways: Why Growth is the Best Time to Sell

Overall, selling into a growth phase rather than at business maturity will increase your interest from buyers and have a stronger negotiating position, both of these increases the chance of the best type of sale: a bidding war.

Next Week's Topic

In our next issue, we'll explore the importance of having a strong management team in place to have buyers take you seriously. Stay tuned!

See you next week!

Unlocking Wealth Weekly