The Right Time to Sell Your Business? It’s Not What You Think.
Most founders think the best time to sell their business is “when the market is hot”. While market conditions matter, it is just one piece of the puzzle, and there are other factors that matter much more. If you want the most successful deal at the highest value, the real question to ask isn’t whether the market is hot; it is whether you and your business are truly ready.
In Capital West’s 35+ years of M&A experience, the three main factors in a successful deal at a premium price, in order of impact, are:
- The leadership team’s active engagement in driving company growth
- Positive momentum in the performance of the business
- The economic environment and M&A market conditions
Factor #1: Leadership Engagement in Company Growth
The strongest time to sell is when the company’s leadership team is fully engaged and has lots of energy: driving growth, executing strategy, investing time and resources in the future and thinking and acting like long-term owners of the business. That energy signals confidence and continuity, which buyers value highly. The potential buyers are buying the future and will pay far more for a business that is poised for continued growth and long-term success.
The “one more year” trap. One of the most common mistakes owners make is waiting too long, to the point that the leadership team’s drive to grow the business has waned, and they have become caretakers, instead of driving growth and additional value. By then, energy has shifted from building to maintaining. Strategic initiatives stall, growth slows, and leadership engagement fades.
Buyers notice engagement, and it is reflected in the price they are willing to pay. Even if performance is stable, a business led by a disengaged team feels different and is valued lower by buyers.
Factor #2: Positive Business Performance
Buyers are not buying your historical performance; they’re betting on the future potential of what you’ve built. Their view on the future is often largely driven by the historical trend as a key indicator of the outlook in the near to medium term. That’s why positive momentum matters.
Optimal timing to maximize purchase price typically aligns with:
- Revenue and cash flow on a historical upward trajectory
- New initiatives gaining traction
- A clear, credible path for future growth
Selling during an upswing, before performance plateaus, creates a powerful dynamic. Buyers see opportunity, and a good M&A advisor can leverage the positive trend in business performance to create competitive tension and ensure buyers feel more urgency to act.
Don’t wait for peak results. Founders often make the mistake of trying to time their exit perfectly when results peak, thinking they will squeeze the last drop of growth from the business. Waiting until growth slows or results flatten weakens your story, and purchasers will pay a lower multiple on profits, to reflect less perceived upside going forward.
Factor #3: Economic Environment and M&A Market Conditions
Positive market conditions are a nice-to- have, but not the most important factor. External factors such as interest rates, GDP and other economic indicators, stock market valuations, capital availability, and overall M&A deal activity do influence deal valuations. However, these factors are out of your control, and trying to time the market is extremely difficult. If you are fortunate enough to time general market conditions perfectly, there are almost always unforeseen developments, some of which could negate any positive market conditions (e.g. certain very logical strategic buyers are too busy on other deals or have other strategic priorities at the specific time you are on the market). And even in a hot market, an underperforming business with negative momentum is a tough sell.
Handicapping all these external factors that are beyond your control is impossible. External market conditions are an important consideration but far less important than the other two factors above: leadership engagement and business momentum.
Final Thoughts
The most successful business sales, at the highest prices, happen when leadership is energized and driving growth and business performance is trending positively, with a bright future of even greater things on the horizon.
In other words, don’t wait so long that you or your leadership team are burned out and can’t wait to exit. The optimal time to sell for top dollar is often when you and your team are still very excited about the future of the business, even if general market conditions are only average. This backdrop will motivate the right buyers to put their best foot forward in a competitive transaction process.
If you are curious about selling your business, reach out to Capital West’s team to start a conversation and see what your options are.
About Capital West Partners
Capital West Partners is a leading independent transaction advisory firm based in Vancouver, BC. As mid-market M&A specialists, we deliver focused financial advice and transaction expertise to Western Canadian companies across a range of transaction situations, including:
- Divestitures
- Mergers & Acquisitions
- Strategic Financings
- Valuations & Fairness Opinions
- Financial Advisory Assignments
Capital West has a proven track record of 30+ years of completing transactions that maximize value for our clients. Since inception, we have completed deals worth over $11 billion in total value.
Capital West is also a proud partner in IMAP (International Mergers and Acquisitions Partnership), a global organization of highly experienced mid-market advisory firms in over 40 countries with a track record of 50 years. Through IMAP, we maximize our global reach to bring industry and country expertise to every one of our assignments, and to find our clients the best buyers and investors in North America and beyond. www.imap.com