If you have the luxury of planning ahead for your exit, here’s a mistake you should try to avoid: waiting until you’re burned out to begin the sale process.
We offer free advice calls for founders thinking about selling their businesses, and that pops up as a common theme. Many founders look to sell because they’re burned out.
Of course, you can sell when you’re burned out, and plenty of entrepreneurs do so.
But in an ideal world, you should sell your business before you get to that point.
In this piece, I’ll explain why, plus how you might think differently about when to sell.
First, here are three reasons why you shouldn’t wait until you’re burned out to sell your business.
1. Selling requires energy
First-time sellers often underestimate the energy required to sell their business. Yes, you have to find a good-fit buyer. But that’s often not the hardest part.
The most energy-draining part of selling tends to be due diligence. This process is different for every company, but the level of difficulty tends to hinge on two factors: how thorough your buyer is, and how well you’ve prepared. Even if you’ve done the basics to prepare for a sale, your buyer might request details and documents you didn’t expect.
While you go through the due diligence process, you also must continue to run the business; and that juggle is what most sellers say is the hardest part. You want the business to do well during this period so your numbers look great to the buyer, and also in case the deal falls through, so you have a strong business to fall back on or offer to another buyer.
“Selling a company like this requires a lot of your attention span,” said Ryan Kulp, who sold SaaS company Fomo in 2022. “So there was a period of a few weeks where, even if my literal work input to the sale process was just a couple hours, it felt like a full-time job.”
That means if you’re usually working at 100% on your business, during the sale process you’re working closer to 130%. And that’s probably not sustainable for long, especially if you have other life responsibilities.
This extra work is a good incentive to put the pieces in place for your business to run without you before you sell. That’s attractive to a buyer, and it also makes the sale process easier, because you’ll have more bandwidth to navigate it.
But if you’re already completely burned out? You might not have the energy to face or stick with this marathon.
2. Maximizing your business value also requires energy
If you work with an M&A advisor for your sale, they will help you figure out how to maximize the value of your business. And unless you’ve built your business with a sale in mind, you’ll probably have lots of opportunities to do that.
The advisor might suggest, for example, that if you focus on a certain arm of your business or a certain type of customer, your sale price will increase. Or maybe you have an opportunity to trim expenses in a meaningful way to increase your profit margin, which can also pump up your sale price.
Sometimes founders have already considered and ignored these possibilities — but once you realize just how much a particular change can increase the value of your business, you might decide it’s worthwhile.
Operational improvements, however, require effort. And here’s the kicker: the ROI lags. It takes time for you to see the results of that effort.
Your buyer will likely base their offer on at least a year of your financials. So if you make improvements, you want them to show up in your financials for at least a year so they make a meaningful difference in the sale price.
Of course, you aren’t required to improve your business before selling it, and sometimes it’s not even the best use of your time. But in the ideal scenario, you have the option. If you come to the table burned out, that might not feel like a choice.
This is where some founders get trapped: they know they could make improvements to maximize sale price, but they don’t have the energy to do it, so they end up in a holding pattern and don’t sell.
In an ideal world, not only do you have the motivation to navigate due diligence, you’re also willing and maybe even excited to do the pre-work that will lead to the best possible deal.
3. Your business will be worth more if it’s on an upward trajectory
The best time to sell your business is when your revenue and profit are increasing.
But if you’re not running the business with the enthusiasm you once had, you might not continue to see that growth. The business might even begin to decline.
Sometimes a business decline is the trigger for burnout, but often, it’s the other way around: you get tired of running the business, and growth flattens as a result.
If your business is flat or declining, it will affect the sale price. I’ve seen several founders in this boat who want to exit, but have their sights set on a sale price that’s just not realistic, given the state of their business. Yet they can’t summon the energy to make the improvements to get there, so they end up unable to move forward.
It’s almost impossible to guess when your business might be at its peak — and likewise, when your energy and enthusiasm for running that business might peak — but ideally, you want to sell before that growth begins to turn.
“Trim all the fat you can while maintaining an upward trajectory on profit,” advised Shea Beck, who sold e-commerce company Foldies in 2021. “Your multiple will be more tied to profit than most stories lead you to believe.”
Most founders want to benefit from that upward trajectory for as long as possible. But don’t make the mistake of riding it to the very end of the road. You need some of that upswing to make the business appealing to a buyer, and to get maximum value at sale.
Choosing the best time to sell your business
So how do you choose the best time to sell? How do you enjoy your business for as long as possible, but get out before you burn out?
It’s not easy to get the timing right. And most founders set the bar high by thinking they have to get the timing perfect. They’re timing not just their own ambition, but the trajectory of the business, changes in the market, where things are going in their industry and more.
But what if the timing doesn’t have to be perfect? What if it just has to be good enough? What if good-enough timing could bring you a satisfying and life-changing exit?
And here’s an even more controversial idea: what if you sell before you’re ready?
This is tricky because you want to be emotionally ready to sell when you head into negotiations. The worst time to realize you’re not ready to part with what you’ve built is when you have a great-fit buyer who’s eager to move forward.
But many of us never feel completely ready to commit to important choices, so we don’t do it until we’re forced to — until we’re so burned out, we know we can’t continue.
So maybe there’s a way to think differently about when it makes sense to sell. Maybe you don’t need to stick with your business for as long as possible or drain every last ounce of potential or check off every single opportunity you identified early on.
Maybe you talk with an advisor when your sale might be a year or two away, so you have plenty of time to make adjustments and set yourself up for the best possible outcome.
Maybe you educate yourself on the process ahead of time — kudos, because you’re doing that right now — so you know to watch out for the early signs of burnout and have a plan to get ahead of it.
Maybe you stop worrying about exiting too early — and feel content with exiting well.