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The decision to sell a business is rarely made in an instant.  It is usually a process.  It can involve several days of yes, a few days of maybe, and a winding path of doubt.  That is OK.  If a client is talking to you one day about selling, but then seems fully engaged the next, that is perfectly normal when you think about the ups and downs a business owner feels, usually without a lot of support.

So if you hear these vacillations from a client, how do you know when it's time to really address the issue of an exit? 

1. When the Sell Conversations Come More Often Than the Stay Conversations

There is a little investment banking joke (so most people won't find it funny), that you know the client is serious about selling his or her business once they buy a boat.  Of course, your clients don't have to buy a boat for you to know they're serious, but these types of purchases can be a strong sign that they are ready.  

Many business owners toy with the idea of selling their business long before they are ready to pull the trigger.  In fact, some will go so far as to take meetings or share financial statements.  However, if they aren't really ready, these types of moves can backfire.  

As an advisor, when you begin to hear phrases from your client about "wanting to spend more time in Arizona or Florida", wanting to "spend more time on the golf course or with grandchildren," it's probably time to bring up the topic of selling your business.

2. When The Client is Thinking About Selling for the Right Reasons

If the client had a bad day/week/month and is frustrated, they probably aren't in a good frame of mind to talk about selling their business.  If however, they are feeling like they are at the end of their capabilities and the business is suffering as a result, then it might be time to start a conversation about exit planning.

3. When the Client Knows What He or She Wants to Do Post Sale

For many business owners the business is their identity.  Selling that company can mean that you have a client that is instantly unhappy.  A business can provide an owner with:

  • a sense of purpose and reason to wake up each day
  • a social network
  • intellectual challenges
  • pride

When you think about how intertwined a business owner is with the operation of the business, it is important to know that they have something to fill that void.  For some, a new career of golf is enough, but for many, it's going to take a much more detailed plan.  Have them make the plan!  Ask them to think about it.  Most of the time, mentally preparing for life without a business is the difference between a successful sale transaction and one that is filled with fighting and tension based on emotion.  

4. When They are No Longer Interested in Trying to Time the Market

Sellers who want to sell their business, but only if they can do so at the absolute perfect moment, can be a dangerous bunch.  First of all, defining when or what the "peak of the market" is can be difficult and swings wildly based on company size and industry.  Secondly, trying to time a sale may leave other important considerations such as lifestyle, family, and asset diversification in the back seat.  Of course, if your business is experiencing a downturn, it may not be a good time to sell.  Additionally, if the market is in the tank, that also might be a difficult time to sell.  But, overall, when a business owner comes to the thoughtful decision to sell their business and they are happy with the valuation range they believe they can attain, they should just go.  

5. When They Have a Plan to Manage the Proceeds

A client that has thought about the business sale in the context of their overall investment portfolio is a smart cookie.  Meeting with a wealth manager to talk about what a sale might mean in terms of financial goals going forward is a great move and an excellent sign that a business owner is being smart about the potential sale.  If a client is starting to have the sale conversation and hasn't yet met with a wealth manager, introduce them to one!  This meeting can make the transition at the end of a transaction much more enjoyable for the business owner.

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