Many aspects of our daily lives have a limited lifespan, including perishable items like milk that come with a specified expiration date. Surprisingly, this same principle applies to businesses.
It's understandable that successful business owners might hesitate to part ways with a venture that consistently generates profits. The question arises: why relinquish ownership when the enterprise reliably provides monthly income?
However, the optimal time to consider selling a business often coincides with its peak profitability. Business owners, proud of their achievements, may be reluctant to compromise quality by seeking external assistance for growth. They push their enterprises to their limits independently, only considering exit strategies when growth plateaus.
Here lies the crux – there's nothing inherently wrong with this approach. Businesses must continually evolve to remain successful, a fact well understood by owners. When a business owner realises that further growth is unlikely under their management, two choices emerge.
Firstly, they can sell to a buyer well-equipped to sustain the business's growth. Alternatively, they can persist with the status quo, risking business decline due to stagnation.
Timing is crucial for a successful business exit. Delay or choosing to "ride it out" can lead to disaster, jeopardising potential returns for owners.
Consider this scenario: a business generating £50,000 in monthly revenue hits a growth barrier due to limited resources. Competitors are gaining ground, threatening to rapidly seize market share. At this point, two options arise:
Option 1 – Sell
Imagine receiving an offer of £1.2m from an equity group or a larger company capable of driving sustained growth, potentially leaving competitors behind. This strategic move prevents the loss of market share due to stalled growth.
Option 2 – Ride it out
Choosing to persist may result in competitors overtaking the business, capturing a significant portion of the monthly revenue. The business's value diminishes, and monthly revenue is likely to decline further.
Considering these scenarios, selling a profitable business during a growth impasse due to resource constraints becomes a logical choice. Successful business owners keenly sense this narrow window of opportunity and act swiftly to capitalize on it.
Our advice to clients: if your business is currently at its peak of profitability, it might be an opportune moment to plan your exit. If you're considering selling, why not start with a complimentary valuation?
Click HERE to request a FREE business valuation today!
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