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John Warrillow

Seven reasons to sell out now Add to ...

It seems to me that we’re at a fork in the road.

There are some positive signs that the economy is entering the earliest stages of a long-term expansion, but at the same time, if I dare to read the headlines, it seems that we’re destined to repeat 2008.

It’s precisely because we’re at this inflection point that I see a lot of business owners thumbing the eject button. If you’ve been thinking of selling your business, here are seven reasons to get out now:

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You’ve lost the stomach for it

A lot of business owners took The Great Recession in the teeth. If you’ve got your business stabilized and the prospect of fighting through another recession leaves you panic-stricken, it’s time to get out.

The worst is behind you

Let’s say you were mentally getting ready to sell back in 2007. Then 2008 hit, and 2009 was your worst financial year in recent memory. You cut everything you could in 2010 and now, as 2011 nears an end, you’re starting to see some profit and revenue growth. With your numbers going in the right direction, now might be just the right time to get out.

The tax man is coming

Governments around the world are looking for money to fund the costs of an aging population. Capital gains taxes are relatively low – zero for the first $750,000 of gain on a qualifying Canadian small business – and that generosity may not last forever.

Nobody is lucky forever

If you’re lucky enough to be in a business that actually benefits from a bad economy, congratulations. You’ve probably just had the three best years of your business life. But no cycle lasts forever and right now may be a great time to take some chips off the table.

The coming glut

As a business owner, demographics are not on your side. As the baby boomers start to retire, we’re going to have a glut of small businesses come on the market. That’s great if you’re buying, but, if you’re a seller, you may want to get out ahead of the flood.

The closing window

It’s been tough for private equity companies to raise money since 2008; so many firms had their last successful round of fundraising in 2007. Many of these funds have a five-year window in which to invest; otherwise they are required to give the money back to the people who gave it to them. Some boutique private equity firms will make investments in companies that have at least $1-million in pre-tax profits (larger private equity firms will not go below $3-million in EBITDA). So, if you’re in the seven-figure club, you could get a bidding war going for your business among private equity buyers keen to invest their money before they have to give it back.

A good time to be liquid

The stock market is down in the last few months and may be headed for an even bigger drop, which is why it might be nice to get liquid. With cash in the bank, you will be able to take advantage of a fire sale on the stocks of good-quality companies should the market sink.

If you feel like a gambler at a blackjack table with everything riding on the outcome of one hand, it may be the right time to take a few chips off the table.

Special to The Globe and Mail

John Warrillow is a writer, speaker and angel investor in a number of start-up companies. You can download a free chapter of his new book, Built to Sell: Creating a Business That Can Thrive Without You.

Join The Globe’s Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT



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