As trusted advisors, accountants are uniquely positioned to guide business owners on one of their most critical decisions: when to sell their business. Timing a sale can make the difference between maximizing value and missing out on significant opportunities. At Gateway School Sales, we specialize in helping owners achieve seamless, profitable transitions. Below, we provide actionable insights to help you counsel your clients on recognizing the right moment to sell, with a focus on balancing current business value against future risks.
Recognizing Personal Triggers for Selling
Personal circumstances often signal the need to consider an exit. Be ready to assist your clients to evaluate these key factors:
- Retirement Readiness: If a client is nearing retirement without a clear succession plan, selling can secure their financial future. Ideally, preparation starts 2-5 years in advance to optimize operations and boost value. Ask: “How does your business fit into your retirement goals?”
- Health or Burnout: Running a business is demanding. Health challenges or burnout can erode an owner’s ability to maintain performance. Selling while the business is strong preserves value. We’ve guided owners who sold at peak health, enjoying their proceeds without ongoing stress.
- Life Milestones: Major life changes—relocation, family shifts, or new passions—can prompt a sale. For example, an owner eager to pursue philanthropy or travel may find selling unlocks the freedom they seek.
Use your regular financial reviews to initiate these discussions: “Your numbers are solid—what’s your long-term vision for the business?”
Evaluating Business Performance and Market Conditions
Timing of a sale hinges on the business’s strength and external market factors. Here’s what to watch for:
- Peak Performance: The best time to sell is when the business is thriving—strong revenue growth, healthy margins, and a loyal customer base. Three to five years of consistent growth often signals a peak. Waiting for “one more good year” risks a downturn if conditions shift.
- Favorable Market Conditions: Economic booms, low interest rates, and high buyer demand create premium valuations. For instance, industries like tech or healthcare may see consolidation waves driving higher multiples. Conversely, looming economic challenges (e.g., rising costs or supply chain issues) can erode value.
- Industry Dynamics: Emerging competitors, technological disruptions, or new regulations can reshape an industry. Selling before these pressures hit maximizes returns. We’ve helped manufacturing clients exit before automation disrupted their models, securing top offers.
- Valuation Multiples: Use metrics like EBITDA multiples to assess value. If your client’s multiple exceeds industry norms, it’s a prime selling window. A rule of thumb: If the business’s value meets retirement needs with a buffer, it’s time to explore options.
Recent M&A data shows businesses sold at peak cycles command 20-30% higher valuations. Share this with clients to underscore the cost of waiting.
Current Value vs. Future Risk: A Critical Balance
One of the most compelling reasons to sell is to lock in current value before future risks materialize. Here’s how to frame this for clients:
- Protecting Current Value: A business at its peak today may not maintain that value tomorrow. For example, a company with $2 million in EBITDA and a 5x industry multiple is worth $10 million now. If market conditions soften or a key client is lost, that multiple could drop to 3x, slashing the value to $6 million. Selling now captures the high-water mark.
- Mitigating Future Risks: Every business faces uncertainties—economic downturns, supply chain disruptions, or loss of key employees. For instance, if 40% of revenue comes from one client whose contract is up for renewal, waiting could be costly. Similarly, rising interest rates can deter buyers, lowering offers. Selling before risks materialize safeguards wealth.
- Tax and Cost Considerations: Current tax policies, like qualified small business stock exclusions, may favor selling now. Future regulatory changes or rising operational costs (e.g., labor or materials) could shrink margins, reducing attractiveness to buyers.
As an accountant, you can illustrate this with data: “Let’s model your current valuation versus potential risks over the next 3-5 years.” Show how a $10 million sale today compares to a potential $6-7 million sale if risks like market contraction or operational hiccups occur. This clarity helps clients see the stakes.
Succession and Risk Management: Planning Ahead
Many owners hope to pass the business to family or employees, but this isn’t always viable:
- No Viable Successors: Without a capable successor, selling externally ensures continuity. Delaying can lead to forced sales at lower prices. We’ve seen owners regret waiting when no internal buyer stepped up or had the funds to purchase.
- Broader Risk Management: Beyond succession, risks like cyberattacks, regulatory shifts, or key staff turnover loom large. Selling while these risks are low avoids a fire sale. For example, a client sold their logistics firm before new emissions regulations increased compliance costs, preserving a high valuation.
Run scenarios with clients: “If you sell now at $10 million, here’s your after-tax outcome. If risks hit and the value drops, here’s the impact.” This data-driven approach builds confidence.
Starting the Conversation
Discussing a sale can feel sensitive, but your role as a trusted accountant gives you credibility. A few ways to approach the discussion:
- Tie to Financial Reviews: During tax or cash flow discussions, pivot to exit strategy: “Your business is performing well—have you considered how to realize this value?”
- Educate: Share success stories or stats (e.g., 20-30% premium for peak sales) to normalize the idea. Highlight benefits like tax advantages, wealth diversification, and stress reduction.
- Partner with Experts: Collaborate with Gateway Mergers and Acquisitions for a no-obligation valuation. This gives clients clarity without putting pressure on you.
Owners often overestimate value or underestimate preparation time. Your guidance can prevent missteps.
The Payoff of Timely Selling
Selling at the right time delivers more than financial gain—it brings peace of mind. Clients who sell strategically report reduced stress, secure retirements, and excitement for new ventures. At Gateway, we’ve facilitated sales that exceeded expectations, from family businesses to mid-market firms.
Ready to Advise? Let’s Connect
Gateway School Sales is here to support you and your clients. Whether it’s a valuation or strategic planning, our team ensures smooth, profitable exits.
Contact us via email or give us a call to discuss a client scenario or request more information at (972) 267-9003.
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