Startup Guide: Is It the Right Time to Sell Your Business?

Building a business from the ground up is something to be proud of. Entrepreneurs often begin their endeavour with an idea, skill, or passion that transforms into a successful business model. How do you know it is the right time to sell your business and pursue your next big idea?

It is no small achievement constructing a business from scratch. Growing an idea or interest into a thriving business is a unique skill entrepreneurs possess. However, the day often comes when owners begin to question whether they should move on. There might be several reasons to sell your business, such as retiring, pursuing new opportunities, or favourable Asia-Pacific market conditions.

Regardless of the reasons, timing is everything – and a critical first step when deciding to sell your business is to identify the ideal window of opportunity to exit.

hive life_Is It the Right Time to Sell Your Business?

5 Ways Business Owners Know When to Sell

Passion is a key driver in getting a business off the ground in the first place and it should remain a factor in deciding to move on. A passionate business owner isn’t clouded by their love for the business but rather eager to witness its prolonged success.

Of course, letting go is never easy, but here are five ways business owners know it’s the right time to sell.

1. The Business Has Appreciated Value

Currently, Samsung Group, located in South Korea, leads in valuation at US$107.28 billion, while the Industrial and Commercial Bank of China (ICBC) follows at US$75.12 billion – accounting for the technology and banking sectors.

In a booming APAC market, appreciation values are heightened among some of the globe’s most popular brands. If business owners have reached top-tier revenue growth for their industry, it may indicate they should sell.

Even if retirement is far off, selling a business when it is most profitable ensures future financial stability – and business owners may even choose to stay active under the new owners to foster continued growth.

2. Market Conditions Are Favourable

Global markets fluctuate constantly. However, APAC is on track to become the fastest-growing market with a compound annual growth rate (CAGR) of 7.9% between 2020 and 2027 – especially in the manufacturing, consumer electronics, and semiconductor industries.

In fact, approximately 60% of APAC’s general partners maintain a positive macroeconomic outlook for the region in 2022.

Some of the market indicators to look out for when deciding on the right time to sell are the number of recently closed transactions, high strategic buyer activity, low taxes and interest rates, a robust economy, and lower debt financing.

Business owners should, of course, consider their industry’s market trends specifically when selling their company, as well.

3. Company Growth Stalls

Starting a business is hard and running it is sometimes even more challenging. As business owners establish their companies, much risk-taking is involved. But as their valuation increases, too much risk may lead to losing everything they worked so hard for.

Yet, business growth may fall flat in market trends without some risk. For example, in 2021, the United States financial agency Citigroup announced that Singapore’s United Overseas Bank (UOB) would acquire its consumer banking businesses for $3.6 billion in Indonesia, Malaysia, Vietnam, and Thailand. The move came from the firm’s inability to compete in the most prominent and fastest-growing APAC retail banking markets.

Perhaps “cutting losses” isn’t always the best way to view a business acquisition, but rather a way for other leaders to step in who are willing to take risks or make changes for continuous growth.

4. Looking for New Opportunities

An entrepreneurial spirit is hard to tie down, so it may be that business owners are interested in pursuing a new opportunity.

The APAC market comprises thriving industries that entrepreneurs may want to venture into next, including its embedded finance industry, which has a projected CAGR of 24.4% between 2022 and 2029, particularly as APAC continues to lead in financial technology innovations. APAC’s in vitro toxicology testing market expects to have the highest growth rate by 2027, about 38% of footwear market growth will derive from APAC by 2025, and the global automotive plastics market is expected to have a 5.31% CAGR by 2030, primarily in China and India.

Entrepreneurs might also consider new opportunities in the off-highway electric vehicles (EV) market, where APAC remains the world’s largest EV manufacturer and demand is at an all-time high.

5. Owners Are Ready to Move On

Business owners may simply decide it’s time to pass the torch. Retirement, health, relocation, and burnout are excellent reasons for selling.

Business owners should assess their feelings about exiting the company they worked so tirelessly to build and ask themselves the whether they are excited to come to work every day, or do they feel exhausted, frustrated, and worn out, have they lost their motivation or slipped behind the industry’s trending innovations, skills, and expertise, and can they see themselves in charge for the next five or 10 years?

Timing is sometimes more of a personal decision and may not always account for market conditions or appreciated value.

Best Practices For Selling Your Business

Several best practices should be followed once business owners decide to sell. For starters, researching the company’s valuation and gathering all financial statements will be an integral part of the exit plan.

Likewise, smart contracts during the sale will help create a digital footprint to ensure conditions get met and all signatories have signed.

Business owners should not rush their decision or their actual departure. Strategizing a business sale may take about two or three years to prepare team members and employees for the impending changes.

Developing a sound blueprint for navigating potential challenges and choosing the right leader to acquire operations is also essential if business owners wish to ensure their company’s legacy.

A New Purpose

A successful exit requires owners to develop a system that enables what was initially built under the new leadership. Essentially, the decision to move on from one venture often leads to a new purpose for the business overall.