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Is waiting for “The Market” to improve worth the risk? – selling a business

  |   selling a business

uncertaintyI have been speaking with a business owner on and off for a couple years about selling a business.  She has gotten close to signing an engagement agreement, but keeps pulling back.   Her latest answer to my asking “why” was she wanted to wait for “the market” to improve.  She meant the stock market (after Spring 2022’s swoon).

Ironically, the market for her business is rather strong.  A long-time business in an industry with good margins and a fair amount of consolidation going on (i.e. many buyers), and she good managers. Her price expectations were reasonable. She has saved a fair amount for retirement, and the cash proceeds of the business would help top off her retirement funds.  She even had some ideas for what to do in her “next chapter of life”.

To recap:

1. The market for her business is ready

2. Her business is ready for a sale

3. She is emotionally ready to leave, and financially as well (so she claimed)

BUT, the stock market swoon made her feel that she “needed” to work on her business and save more money for retirement.

Interesting.  She was going to double down on one stock – her company because her diversified retirement portfolio took a hit. In other words she was going to INCREASE her risk on one ILLIQUID asset.

Maybe it’s me, but does that make sense to you?

If the market for her business is strong (i.e. getting a good price and terms, where she would get a consulting contract for 2-3 years), how is taking NO MONEY off the table, and having to WORK for each dollar of profit, LESS risky?

It’s not.

What’s more, she could take the cash proceeds from the sale and invest in the stock market at 20% lower prices than January 2022, when she was “ready” to sell.

If she waits 1 – 2 years, there is no guarantee the market for her business will continue, but if the economy improves and the stock market recovers, she may be buying stocks at HIGHER prices than today


Bottom line:  when the market is ready and the business is ready it is usually a good time to sell.


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