One common question we ask those who have successfully sold their business is: When did you know it was time to exit?
Many answers come up, but the commonalities we hear are:
- You cannot time an exit perfectly. You can certainly try. But, if you closed your sale in 2019, there was no way that you could have known a global pandemic would make people clamor for more consumer goods in 2020 and 2021.
- The timing is right when a sale can help you reach your goals financially, professionally, and personally.
- The timing for the sale of your eCommerce business should be well-planned and considered in advance. It’s never a good idea to wake up one day and try to sell your business to the nearest aggregator without an exit strategy in place.
So, that begs the question, when is the timing right for an exit? Let’s take each of the above factors into consideration:
The “Perfect Timing” Fallacy
The only perfect timing in selling an eCommerce business is the best timing for you. External factors can always throw a wrench in your business or make you wonder if you should have held on for one more year.
However, there are a few things you can do to make the timing of your exit the best it can be. Here they are:
1. Get your financials in order and ensure they stay in order. Many brands are undervalued because of unclear financials. This step alone can increase your EBITDA by thousands – if not millions.
2. Time new product releases so that the products will be turning a profit by the time you are ready to negotiate your brand sale. If products will need plenty of investment upon launch (as they often do) do all of the planning, design, research, and sourcing, but hold the release and use these products as leverage during the negotiation.
3. Plan your exit before you are burnt out. Many brand owners sell when their business is on the downswing because they are completely burnt out and have nothing left to give. Plan to exit when profits are increasing, and you are still working hard to grow and scale.
4. Layout your ideal deal structure. Understanding what you want when you get to the negotiating table will provide you with a firm starting – and ending point. It will also allow you to determine if this is the time to exit, or if you need to build your business further to ensure you get the best return for all of your investment.
Consider Your Goals
Many entrepreneurs are perfectly happy to grow their brand and keep growing and scaling for the next decade. If that isn’t you, it’s time to take a step back and consider: Why? What goal are you seeking? Do you want financial freedom? What would constitute financial freedom for you? Do you want to spend more time with your family? What kind of exit framework allow you to achieve that goal? Do you want to pursue a different career? What would a sale need to look like for you to take your first step on a new path?
Understanding your goals will help you determine when the timing is right for your exit.
Form an Exit Strategy
Many brand owners sell haphazardly. With aggregators gobbling up the competition, the temptation is there whenever you get an email with a tempting offer. However, if a company found your brand meets their criteria for acquisition, how many others might do the same?
This is where an exit strategy comes in.
Creating an exit strategy involves you, the business owner, taking a step back and determining:
a. Do my financial statements show what my business is worth, or do they need some work?
b. Can I do anything to increase my company value in the next several months?
c. Is my IP and legal status all above board, or do I need some help from a lawyer?
d. Is my business easily transferable?
e. Do I have products that could be developed and set up for release upon purchase of the brand?
f. What do I want to get out of an exit?
g. How will I ensure I negotiate competitively to get what I want?
Other factors go into your exit strategy, but the most common issues we see when working with brand owners are:
- Clean financials
- Making your business as valuable as possible
- Ensuring it is transferable
If you are hoping to make an amazing exit, it’s time to get in touch with the Amazing Exits team to find out how to achieve your goal. Schedule a call with us here or take the Freedom Score Assessment to find out how close you are to an ideal exit.