Key Factors That Drive Timing Your Exit / by

 

When you start planning early how to get out of your business, you have more opportunities to consider, apply or change a wider range of factors.  Here’s a short list of Seller Factors, Market Factors and Buyer Factors that can impact the timing of your exit.

  • Seller Factors – these are factors within your domain where you have the option and control to make changes or make different decisions.
    • Lack of capital
    • Growth beyond comfort level
    • Contingency/Continuity Plans
    • Tradeoff between selling early and selling late
    • Owner Boredom / Burnout/ Health/ Family
    • Legacy/Dynasty
    • Other interests
  • Market Factors – these are factors outside your direct control but they impact your customers, demand for your offering, competing companies for sale, and valuation.
    • Favorable economic climate
    • Low interest rates
    • Advantageous tax treatment
    • Government regulatory changes
  • Buyer Factors –these are the factors your potential buyers think about, study and weigh in timing their acquisitions
    • Meeting growth expectations
    • Slow organic growth
    • Increasing competitive pressures
    • Diminishing market share
    • Globalization of industry

Sellers do not control the timing of the transaction, the BUYER and the MARKET determine timing, but sellers can be prepared and take control of many factors that drive price and timing.

  • Achieving liquidity is most often the single most important financial event for a private business owner. Market timing is perhaps the most critical factor to securing maximum value in the sale of a business.
  • While numerous factors may drive a seller to seek immediate liquidity in their business, currently, the needs of the buyer and the conditions of the market ultimately dictate timing and value.
  • Selling a business when the owner is done with the business, too often leads to lower valuations and less leverage. Achieving maximum value for a business requires the owner to commit to be mentally and emotionally prepared, to make the business buyer –ready and buyer-attractive, to be “deal-ready,” to start monitoring the buyer markets and then act decisively at the proper time.

MARKET Timing Conditions

  • When you are evaluating the right time to sell a business, market timing is critical. The local, national and global economic climate, interest rates as well as the tax and regulatory environment all impact market timing.
  • Current interest rates are at the lowest levels in the past fifty years. These low interest rates reduce ROI rate requirements for optimum buyers for your company. Financial buyers can pay more to acquire your business.
  • Lower long-term capital gains tax rates also allow sellers to retain more value than ever before. Currently, a seller can benefit from a 15% long-term capital gains tax rate. However, these rates will be phased up to 20% over the next five years.

BUYER Timing Conditions

  • Strategic buyers at large public companies are under pressure from Wall Street to meet revenue growth and earnings projections. These buyers are always monitoring buying opportunities in order to rapidly improve corporate position and strength. Strategic buyers purchase companies to increase market share, expand geographically, acquire new products and gain competitive advantages.
  • Added competition in the market drives up valuations for buyers to compete effectively.

This Way Out Group understands the importance of timing in selling your business

The team at This Way Out has decades of experience helping owners to sell private companies. We are experts at evaluating options and understanding timing, including both market timing and seller timing issues. We can show you how to use both the timing of strategic buyers and market timing to your advantage.

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