The following is an excerpt from "Demystifying the Process of Selling Your Business" by OneAccord Senior Partner Scott Smith. In it, he covers common myths that exist around transitioning out of a business. First, he'll address the myth that shutting down is simple and convenient. Then, he'll consider the temptation to time the market when selling.
Shutting Down Instead of Selling
Shutting down a business is expensive and complicated. You are liable to the IRS, your bank, your employees, your vendors, your customers, your landlord and anybody who has ever had an account with you. There’s also the question of how your business is set up — can money be moved around or will your tax burden be as high as humanly possible?
Walking away does not relieve the complications or the expense. It makes them worse, and then the complications chase you — or your family. Get an advisor and plan ahead. Even if you choose to shut down, proper planning will make it far less cumbersome and difficult.
The Best Time To Sell
Selling a business has more to do with your track record as a company than it does the time of year. Your earnings growth, revenue growth and the market are going to impact the value of your business. So sell when these are good.
It can be tempting to hang onto the business as long as possible to continue increasing the value. This could work out really well for you by bringing in a better price, but be aware that there is some risk involved. Nobody knows when a natural disaster will strike, economic downturn will hit or a new product will come to market and make your business obsolete. Remember typewriters and phone booths?
Speak with an expert about transitioning your business.