When is it time to sell your business?
How to decide when to sell or when to double down?
Last week, I was offered 20x what I paid for a business that I acquired just 5 months ago. Then, recently, in another business, I received a cash-offer of about $3 million.
In both cases, I wasn’t planning to sell— and I turned both down.
Knowing when it’s the time to sell and being able to balance that with the future growth potential is perhaps one of the most difficult parts of buying, building and selling businesses.
Why didn’t I sell either of these businesses?
It isn’t because I don’t need the money, in truth— all that I’m building now is costing a lot of money and I’m considering raising a round to fund the build phase.
For me, it came down (in both cases) the following reasons:
When you’re selling a business, there are 2 key times to sell the business.
Growth Curve: When the business has been growing and you can easily show that the business will continue to grow over the next 2-3 years, easily.
Stabilized: When you’ve had growth and now have a stabilized business producing profits in a predictable pattern.
When you sell any other time besides this, you’re generally selling too early and if you’re attempting to maximize return for that sale, it’s not the best time.
In my case, both of these businesses were in the “way to early” stage and while I stumbled upon the right time and place for someone to buy it, I would, without almost a shadow of a doubt be selling for far too little.
When you’ve learnt all the lessons you want to learn from the business
I believe that business is one of the best teachers and every business allows us to learn, it’s probably one of the best parts.
Both of the businesses that I had offers on were part of Wisdom Media and the truth is, Wisdom Media is brand new— I still have no idea if it’s going to be a $100M company or a complete dumpster fire.
By selling either of these companies now, I wouldn’t get to learn the lessons from this group, which would allow me to have the successes and failures required in order to effectively build Wisdom Group into a great portfolio company.
By simply “flipping”, I would get paid in cash, but not in experience.
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I didn’t have multiple offers
When I’m selling a business, I want multiple offers. Why? Because, it allows you to not just get the best offer, it changes the power dynamic in your favor.
If you have a single offer, it’s likely every part of the process will go slow, much like everything in life, if you’re in-demand— your life will be much better.
Further, I didn’t believe I could get an offer to match those that gave me the offers on these businesses.
I believe I can sell for FAR more in the future
If someone gave me an offer of $3 million and I thought I could get $4 million, I would take the $3 million offer, because the upside is lower than the downside.
However, in this specific business, I believe that the business in a few years will be worth at least $10 million and Wisdom Media, over $100M.
Simply put— my best is simple: Either this won’t work, or it’s a 9-figure business. If I sell, at a “discount” valuation, it’s because I failed.
My ego doesn’t like it
Let’s call a spade a spade— In just 2 of these businesses, I got offered life changing money for almost 99% of the world’s population.
I get that.
And I know a few things are true… either
a). My vision has made it so I’m delusional and I made the wrong choice
b). My vision has made it so I can’t be bought (*early)
Further, while it would of been “cool” to say something has been acquired, I know deep down, it was the wrong choice.
It didn’t feel “right”
While I’m a big fan of using data, analytics and intellectual consciouness, I’m also a big fan of intuition and using the gut.
For me, this was a solid NO from the start, the gut said no and then I used the data to ensure that it wasn’t simply me being emotionally attached to my vision (still possible).
I’m not burnt out
Sometimes, building your business for sale, doesn’t end up making sense, simply because… you’re burnt out.
There’s lots of reasons why someone might burn out, however, in this case, I’m just getting started and I would, as I’ve said, learn the lessons.
Generally speaking— if you’re burnt out, a lot of the time, the best choice IS to sell, even if you don’t maximize value.
My investors wouldn’t of got the return I wanted them to have
My investors on one of these businesses, would of been happy, however, one thing I’ve learnt in my time, is if you make people a lot of money, they make you a lot of money.
Through my mentorship business, I’ve helped 100’s of people built 7+ figure businesses and through it, it’s made me a lot of money.
So— while a nice return, would have been nice. I’m far more excited to make them FAR more money, so they can reinvest in what I’m building in the coming 30 years.
In truth, selling at the “right” time comes down to this…
A combination of knowing…
Your lifecycle in the business
How far you can bring the business
Your desire to continue learning lessons
The market and the desire inside of the market
Your vision for what you want to create
My best advice, as always is… built it, so you can sell it and build it so a LOT of people want to buy it…
And… you’ll always know deep down when it’s time to sell and move into the “next” era :)
Ok, I’m gone back to building stuff. Until next time, friend.