One Way To Decide When To Sell your Business
How to Decide the Best time for you to Sell Your Business or Cash Out
How do you know the right time to sell your company? One answer to this age-old question is that the time to sell is when someone else is willing to invest more in your business than you are.
When you start a business, nobody is willing to invest in its success more than you. You’ve already worked a 40-hour week by Wednesday and, if you’re like most founders, you’ve invested a big chunk of your liquid assets to get your business going.
You’re all in.
In the early days, you are willing to risk your business on a new strategy because the business is pretty much worthless.
“When you ain’t got nothing, you got nothing to lose.”
As your business grows and becomes more valuable, you may find yourself becoming more conservative, unwilling to risk the equity you have created inside your business on your next big idea. You have reached a point where someone else may be willing to risk more time and money for your business than you are.
When To Sell Your Business
The point where a buyer is willing to risk more than you are happens at a different stage for everyone. Let’s say you have a business worth KSH 10 million today. Would you be willing to risk the entire thing on a new strategy for a shot at making it a KSH 100 million company? Many entrepreneurs would take that bet.
Now imagine you have a company worth KSH 100 million and your business represents the bulk of your net worth. Most would argue KSH 100 million is life-changing money. Would you be willing to risk your entire company for a chance to make it a KSH 190 million company? The marginal utility of an extra KSH 90 million is minimal—we all only need so many cars—but the risk is significant. Fewer owners would bet KSH 100 million for a chance at KSH 190 million.
What if your business was worth KSH 500 million? Would you risk it all for a long shot at becoming a KSH 1 billion company? It is hard to imagine any one person betting KSH 500 million on anything, but if you’re the CEO of a multi billion company with ambitious growth goals, KSH 500 million is a bet you may be willing to make.
When someone else is willing to invest more in your business than you are, it is probably time your company finds a new owner.
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