Knowing When to Sell Your Business

Article Written by Jeff Gross

When should an entrepreneur sell his business?  Most entrepreneurs think it is never a good time; most M&A advisors think it is always a good time.  Unfortunately, this question is never given the consideration it deserves at the appropriate time.  I have come up with a simple test of when you should seriously consider selling your business.

If a business’ market share is not growing, an entrepreneur should consider selling the company.  This test is based on finance theory (portfolio and efficient market theory), good business principles, and years of observation.  In 8 out of 10 cases, a company that is not gaining market share should be sold.  When faced with that situation, a good business person should analyze a sale with his professional service providers and board as part of a strategic planning process.

Let’s be clear about market share…it is not the same as revenue growth.  Market share is all about growing faster than your industry average.  If you are not growing faster than your average competitor, you are maintaining or losing market share.

There are a number of reasons to sell, but the reason I am focused on is that it is in the entrepreneur’s financial interest.  Entrepreneurs forget that they have the most valuable human skill, the ability to start and grow a company.  If the company is not growing, the entrepreneur is not using his most valuable skill and not maximizing the value he or she can create.  Conversely, approximately 15-20% of the entrepreneurs I have worked with have lost everything late in their careers because they hung on to their business too long.

Let’s consider a few examples:

·         Growing industry, declining market share – When the industry stops growing, a better-run, better-capitalized company who was growing market share, is going to turn its attention to taking your business.  Better to partner with that company on the way up than hold on to your company too long.  Typically, sellers in growing industries receive out-sized premiums regardless of performance.  After the market has matured, the market leader is more likely to compete for the business than pay for.

·         Stable industry, declining market share – It takes different personalities and skills to succeed in a zero real growth (no more than inflation) industry, than it does to start and build a company.  Entrepreneurs generally are better off to sell, diversify the proceeds, and start another company.  It will increase income and reduce the risk of losing everything.

·         Declining industry, declining market share – Declining industries lead to industry consolidation where market leaders emerge with the recovery of the industry or economy.  Those market leaders can create significant value for a failing company in a distressed environment.

Declining market share and the sale of a business are not perfectly correlated, that is why I recommend considering a sale.  An honest financial professional can help you make the right determination for your business.  This is a great time to also look internally at personal factors (please refer to Is It Time to Move Your Own Cheese?).  However, do not use the imperfection correlation as an excuse to do nothing.  As an entrepreneur, you will be wrong greater than 80% of the time and you will pay the price for it financially.

Allegiance Capital Corporation own Private Investment banks in Dallas and M&A advisory's in Chicago that help business owners buy and sell their business. This article is also visible on  titled Knowing Whend to Sell Your Business and direct link to www.allegiancecapital.com/blog

Private Investment Bankers Dallas and Chicago

Private investment bankers Dallas and Chicago are in great demand these days. The growing popularity is on account of various functions performed by them and services provided to their clients. They provide one stop solution to all the investment decision needs, consultancy services, financing requirements, equity management etc.

It is needless to say that the team of experts at these investment banking firms is highly knowledgeable and experienced in various realms of conducting business. Their expertise lies in helping their clients take effective business and investment decision that will help them in multiplying their worth multiple times.

The importance of a highly reputed and experienced investment banking firm has also increased post recession as the businesses are looking for new and innovative ways to carry out their business activities. The various ways in which investment bankers chicago assist their business clients include helping them make judicious business decisions by providing them with all the needed market information and business statistics.

An investment banking firm has specialized knowledge in various domains of carrying out a business in all possible industries. In fact there are industry specific investment banking firms that specifically cater to the business needs of firms and corporate organizations operating in a particular industry.

To begin with, investment bankers bring about consensus with respect to the price between buyers and sellers. Obviously either party would like to maximize its value in a particular deal. The sellers would like to get the maximum for themselves while the purchasers would insist upon a big bargain.

The chances of deadlock or the deadlock itself is prevented by the effective intervention of these advisory firms Dallas. They will make either party involved in the transaction see some reason in compromising a bit on their stand and also ensure that the interest of their clients is enforced.

It is also the duty of private investment banking firm to advise its business clients in the task of making their business appear as a favorable investment proposition to the purchasers and other investors. Whereas buying and selling businesses is concerned, investment bankers are always at hand to help their client go about the process in the most favorable way.

In addition to providing business valuation services Chicago , they also advise their clients interested in divestiture of the best time when it is most profitable to do so. Similarly in matters of mergers and acquisitions, the advice of the acquisition advisors is highly solicited for. They are the ones who are aware of the market standing and asset worth of every firm in the market and can even come up with a few potential investment options for their clients.

The kind of knowledge about the firms in the industry and the market dynamics that is required for effective merger and acquisition solicitation is too well possessed by the investment bankers. Therefore a lot of them are also acting as acquisition advisors for their clients.

Selling A Company Successfully

Every successful business began in the imagination of an entrepreneur. Out of vision, determination, and a relentless pursuit of customers, a business was born and it grew to become an enriching life's work.

Most entrepreneurs get only one opportunity to sell a company, and they deserve to maximize their return.

When business owners are ready to quantify their body of work through a sale, they need an investment banking partner who will protect their interests, very confidentially present their company to the right buyers, and craft the likelihood of a premium sales price.

Allegiance Capital Corporation has a proven methodology, exceptional marketing expertise, and the financial acumen to help get business owners what they deserve. Allegiance Capital has numerous locations and offices for example we have a Private Investment Bank in Dallas, TX as well as Financial Advisory Firms in Chicago, Illinois.