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3 Signs it Might Be Time to Sell Your Business

Burnout. Business growth. An unexpected offer. Knowing when it's time to sell a small business might not always look the same.

Chuck Glassman knew exactly what his exit strategy was the moment he bought Bell Brothers, a heating and cooling business in Des Moines, Iowa. Glassman, who began working at the company when he was 39 and purchased it when he was 55, planned to find a buyer by the time he was 65.

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That buyer turned out to be his son, Jason. But even if had been someone else outside the family, Glassman was keen to solidify plans. He didn't want to wait too long to sell or not have a buyer lined up well in advance.

Glassman is an anomaly—8 out of 10 of small and midsize business owners have no written transition plan, even though succession planning reached the top three of business owner concerns in 2022 according to Principal® research.

Thinking it might be the moment for you to let someone else take over your business? Here are some signs it might be time to sell.

1. You're less patient with (or interested in) in the day to day.

Running a small business is hard—and time consuming. One-third of owners work more than 50 hours a week, and one-quarter work more than 60 hours a week—and that was before the pandemic. Extra hours and responsibilities over years (or decades) can lead straight to burnout, too: 42% of small business owners feel exhausted.

"You can work those extra hours for years and never think about it," says Mark West, national vice president of business solutions for Principal. "But then suddenly, something might happen, and you can sense you're not enjoying what you're doing as much. Once you start having that feeling, then maybe it's time to start getting serious about selling."

2. Your business is at an inflection point.

The inflection point may be one of two types, West says. Your business may be about to make a big leap forward—a new product, transformative technology, or simply unexpected but still welcome growth.

On the flip side, West says, "you might be worried about economy ahead and wondering about the stability of the business you're in."

Either situation may be a sign that it's time to consider a sale. "If you aren't sure what's coming in the future and get a good offer, it makes sense to seriously consider it. The window of opportunity can close pretty quickly," West says.

3. Someone makes you an offer you can't refuse.

Maybe you have a general idea of when you want to both sell and retire—and that's a decade (or more) in the future. That doesn't mean someone else won't approach you well ahead of your schedule. If that's the case, your consideration is whether a potential deal provides the post-work income you need. "Put together a list of your wants," West says. "It's worth your time, particularly if you're not sure what the economy will do in a few years."

West has had business owner friends who sold their companies and stayed a set period, such as two years, to ensure a successful transition. It was a nice bridge between ownership and retirement, complete with a salary and earning incentives.

Glassman sold his business to his son on contract; it mimicked the arrangement he originally used to purchase the company. Those contract payments serve a dual purpose: They provide a retirement income for Glassman and enable the business to maintain cashflow.

And just because you transition out of one business doesn't mean you have to transition out of work entirely. "Leaving a business is emotional, but there's something to be said for after the sale, having time to step back and figure out what you want to do with the rest of your life," West says. "If you're unhappy or frustrated at work, you may have the opportunity to sell and find something else to do in the next chapter of your life."

Before you sell, you need a business valuation. Find out what goes into figuring out how much your company is worth.

Bell Brothers is not an affiliate of any member company of the Principal Financial Group®

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment or tax advice. You should consult with appropriate counsel, financial professionals, and other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Company®. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.

© 2022 Principal Financial Services, Inc.

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Principal Financial Group

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