When’s the right time to sell your business?

Lexi Grant: How do you get the timing right around selling your business? The answer probably isn’t what you expect.

I’m Lexi Grant and you’re listening to They Got Acquired.

Before we get started, here’s one of the ways we help founders.

If you’d like to sell your business, we’ll match you with an M&A advisor, a broker, or a banker who can help. And if you don’t know the difference between those three, that’s totally okay. We can help you figure out what you need.

We’ve curated a network of vetted professionals, and we would love to introduce you to someone you can really trust.

We’ll match you with a broker who has experience selling your type of business and who comes recommended by other founders.

This is a free service for business owners, so go to theygotacquired.com/advisor and ask us for an introduction.

That’s theygotacquired.com/advisor.

After talking to hundreds of founders who’ve successfully sold businesses, we identified three factors.

I spoke on a panel at a conference recently, and someone asked, how should founders think about getting the timing right for an acquisition?

I get why founders ask this question. It feels like such a high-stakes decision. You’ve poured your heart into building something, and now you’re trying to figure out when is the perfect time to exit.

Most founders think this is all about timing the market perfectly — selling when valuations are sky high and buyers are throwing money around.

But here’s the thing — that’s actually not the most important factor.

After talking to hundreds of founders who’ve successfully sold businesses, we’ve identified three key factors that determine the best time to sell.

Market timing is just one of them.

So let’s break this down, and I’m going to go in order of importance.

Factor one: Your business performance.

And this is the big one — the health and trajectory of your business. It’s by far the most important factor when deciding when to sell.

You want to be in a place where revenue is strong, profit looks good, and you’re growing year over year.

Think of it this way: A business with overall poor performance or a poor foundation probably won’t sell for much when the market’s great, and it probably won’t sell for much when the market’s struggling.

And I want to call out the growth piece specifically. We talk more about this in another episode, just about how much growth impacts valuation.

But know this — buyers like growth. They aren’t just buying what you’ve done. They’re betting on the future potential of what you’ve built.

It’s common for founders to underestimate the importance of growth.

Many of us want to keep pushing when things are going well and get the most out of the opportunity. And of course, if you want to keep growing your business, that’s a great choice.

But if you do want to sell eventually, the ideal time is when your business is on an upward trajectory rather than waiting for peak performance.

You want to sell while you still have runway ahead of you.

Factor two: Your personal energy.

And this is the one that everyone forgets about.

This is so undervalued, but it’s absolutely critical for a successful sale.

If you want to sell sometime, your goal should be to sell well before you burn out.

Here’s why: Selling can be draining. The process typically takes three to nine months, and you have to maintain your business performance while managing the sale process.

I can’t tell you how many founders say that this is basically like doing two full-time jobs.

So you want to have gas in the tank to optimize your business, navigate the sale process, maintain strong business performance throughout, and handle everything professionally.

Plus, you might also have an earn-out where you work for your buyer afterward.

Now, what if you’re already burned out, but your business performance doesn’t justify the sale price you’re hoping for?

First, I will say that you’re not alone — especially after the last few years we’ve had. There are a lot of founders in this situation.

So here’s some tough love. It still might be time to sell.

Unless you feel very confident — not just optimistic, but actually confident — that your business will improve over the next year, it might make sense to sell now.

I’ve seen too many founders hold on just a little bit longer, thinking they can pull their business out of a hole, only to sell later for less than they would have gotten initially.

That’s exactly what happened to one founder we wrote about, Talia, who sold a content business after it peaked.

She lost enthusiasm for it, but she held on, thinking she could improve things.

Instead, the business declined alongside her energy, and she ended up selling for half her original valuation.

Factor three: Market conditions.

Next up is the third factor — market timing.

So finally, let’s talk about what most founders think is the most important piece: market conditions.

Market conditions absolutely affect sale prices.

We see this in our coverage of online companies that sold between 2020 and 2022. Many of those businesses had crazy sale multiples.

We’ve actually gotten to the point in our stories where we basically add a disclaimer to these stories that says, hey, valuations for certain online businesses were a bit nuts during this pandemic time, and they’ve since normalized.

So don’t expect to see similar sale multiples now.

But here’s the thing about market timing — it’s completely out of your control.

And it’s also not as important as your business performance and your personal energy.

When the stars do align — when your business is healthy, your energy is good, and you can lean on favorable market conditions — that’s where the really impressive sale prices happen.

I think about Sharon Gillenwater, who sold her SaaS company, Boardroom Insiders, in 2022 when multiples were high.

She had anticipated that those multiples would correct, which is why she decided to sell at that time.

But the health of her business and her energy were already in a good place. She layered market timing on top of those fundamentals.

So don’t wait for perfect market conditions. Great businesses find buyers in any market, and your personal situation just won’t wait.

If you’re solid on business performance and personal readiness and you want to sell, it’s probably a good time to start exploring it, regardless of whether market conditions seem perfect.

Because here’s the uncomfortable truth — there’s never a perfect time to sell your business.

There will always be reasons to wait. Maybe you can grow 20% more next year. Or interest rates might come down. Or you want to hit that next revenue milestone.

All of these moves might make sense for you.

I talk to founders every week who are strategically putting the pieces in place to optimize in these ways.

But if you’re waiting for perfect timing — don’t.

Your business might plateau, your energy might decline, or market conditions might change.

Your goal shouldn’t be perfect timing. It should be recognizing when conditions are good enough and making the most of it.

That’s it for us today.

Thanks for listening. We’ll see you next time.