The timing is crucial when it comes to selling your business amid an economic downturn. While it may seem like the only time to sell is when the market is up, there are potential benefits to seizing the opportunity when economic conditions are less favorable.

Timing the Sale

Changes in economic conditions can affect different industries in different ways. While technology might be on the downturn, manufacturing might be on the rebound. You don't want to be too hasty and sell when your market is at its lowest, but you also don't want to wait too long and miss out on the timing and buyers that work best for your timeline. The key is to keep a close eye on industry trends and economic indicators.

If you see signs of recovery on the horizon, it might be worth holding off for a bit to maximize your sale price. As Live Positively suggests, "Selling in economic stability and expansion is often more desirable as buyers are more willing to pay higher prices, resulting in impressive valuations”. On the other hand, if the downturn seems to be dragging on, it could be a good idea to strike while the iron is hot. Buyers might be more motivated to snag a good deal during tough times, and you could potentially negotiate better terms.

Preparation is Crucial

Selling a business is hard work, even in the best of times. During an economic downturn, it's even more crucial to have your ducks in a row. Make sure your financials are impeccable, your operations are streamlined, and your business is strong to withstand the critical work that can go into an audit, valuation, and sale. Potential buyers will be extra scrutinizing during tough times, so you'll want to present your business in its best light.

Consider bringing in a professional business broker or M&A advisor to help you navigate the process. Forbes recommends this approach, emphasizing that “selling businesses is their specialty; they understand the process, the documents needed and know how to keep the deal moving forward”. M&A Advisors will also have the expertise and connections to help you find the right buyer and negotiate the best deal possible.

Be Flexible and Open-Minded

In a buyer's market, you might have to get a little creative with your sale terms. Be open to alternative deal structures, like earnouts or seller financing, which can help negotiations for potential buyers. Consider your initial asking price a point of negotiation. You might also want to consider keeping a stake in the business for a period of time to show your commitment and help ease the transition.

Be prepared to negotiate and potentially accept a lower offer if it means getting the deal done. As this LinkedIn post advises, “You should also be open to different deal structures, such as earn-outs, seller financing, or equity swaps”. Don’t decline a favorable offer in anticipation of unrealized prospects, particularly amidst challenging economic circumstances.

FAQ

Q: Is it a good idea to sell during an economic downturn?

A: While it might seem counterintuitive, selling during a downturn can actually be a smart move in some cases. Buyers might be more motivated to diversify their portfolios with an existing, successful business, and you could potentially negotiate better terms. Just be sure to time it right and have your business in top shape.

Q: What if I can't find a buyer willing to pay my asking price?

A: If your asking price isn't met, stay open to negotiation and alternative deal structures. Consider seller financing or adjusted terms to attract buyers. Stay realistic about market conditions and seek advice from professionals to navigate negotiations effectively. Remember, in challenging economic times, prioritizing the completion of a sale over holding out for an ideal offer can be advantageous in securing the future of your business.

Q: Should I bring in outside help to sell my business?

A: Absolutely! A professional business broker or M&A advisor can be invaluable during the sale process, especially during an economic downturn. They'll have the expertise and connections to help you find the right buyer and negotiate the best deal possible. Don't go it alone - bring in the experts at Inconic.co to navigate the sale and maximize your chances of success. Their experienced M&A advisors will guide you every step of the way.

The Bottom Line

Selling your business during an economic downturn might seem daunting, but with the right preparation, representation, and mindset, it can be a smart strategic move. Remember to carefully time the sale, have your financials in order, and stay open to creative deal structures. Most importantly, don't try to go it alone - enlist the help of Iconic.co’s team of M&A experts who will leverage their deep expertise and connections to find you the right buyer and negotiate the optimal deal terms.