The two questions I get from business owners all the time are "how much can I get for my company" and "is it a good time to sell".

 

In terms of valuation, tomes have been written about how to value companies.  In the waste, environmental, and industrial space most buyers use a multiple of EBITDA to express value.  Many things come in to play in valuation but the rule of thumb is simply this:  value is in the eye of the beholder.  The more 'beholders' you have, meaning buyers, the better off a seller will be.

 

The tougher question is "is it a good time to sell".  Macro trends like the housing crisis, ongoing high un-employment, and economic turmoil tend to get into business owners' minds and keep them from marketing their businesses for sale.  But that's not always the best choice.  Many so-called M&A companies, particularly those that run seminars for business owners, try to sway business owners to sell using the 'baby boom retirement' card.  They say that baby boomers will all retire and that there will be a glut of businesses on the market driving the value of all businesses down.  Supply and demand right?  These types of 'm&a' firms seem to have a business model predicated not so much on serving the individual business owner but rather on how many business owners they can sign up.

 

Macro trends like these though are real for certain.  But most small to mid-market companies should be looking at micro trends to decide if it's a good time to sell.  By micro-trends I mean simply this:  what's happening to my business, what's happening in my region, how do I compare against competition, how is my business performing.

 

In short, timing the market is difficult to impossible to do.  Just ask stock pickers.  It's easy to see a trend when it's already happened.  Monday morning quarterbacking.  So the most important advice for business owners on timing?  Simply this:  if you are trending up, it is a good time to consider selling.

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