I’ve received a couple of requests for information lately – owners who are wondering if it makes sense to put their company up for sale at the end of the year. The answer might surprise you.
I think November and December are great months to put a company on the market, especially if you’ve been preparing and planning for a sale all year. Assuming you have your financials in order and have made decisions about what you want from the sale, the end-of-the-year holiday period has several advantages for an owner and a buyer.
First, let’s distinguish between professional buyers and individuals who want to buy a business. Professional buyers such as PE firms buy companies year-round; the timing or the season doesn’t matter to them if they find a company worth investing in. But they may be especially interested in making a deal in the last quarter, hoping to close out the year with another win. A new listing in the final months of the year might very well catch their attention.
Individual buyers, however, do pay attention to seasonality, especially if they’re in the HVAC business. In July, when the phone is ringing off the hook, they aren’t thinking about acquiring another business – they have their hands full with the business they own.
But in November and December, they have time to think and strategize. They’ve probably started their year-end review and started working on ways to grow in 2024. Acquisition is one of the fastest and least risky ways to grow a company. They may also be looking for ways to reduce tax liability for the year by investing in new opportunities.
Both owners and sellers have time to breathe during the holidays. There is usually plenty of downtime (except for emergency calls) and many owners are organizing their records for tax season. If an individual is already considering buying a company, they have more time for due diligence. They are more likely to get someone on the phone for a conversation since many businesses experience the same slowdown during these months.
The end of the year provides other advantages for a buyer. The numbers are in, and that makes the financial data more accurate. Again, sellers are more organized at the end of the calendar year (or trying to get there) and more responsive during a slow period for the business.
Will you be able to sell your business by December 31? Probably not – most deals take at least a few months to close. But it may be a mistake for most owners to sell at the end of the year anyway; you’d be adding all the profit from the sale to your 2023 profit, dramatically increasing your tax liability. Selling in February, though, means you have just a couple of months (slow ones, at that) of business to add to your profit from the sale. It’s the best-case scenario for a seller who’s trying to manage how much he gets to keep from the sale.
And more companies will probably be listed in the first quarter of the new year, so a listing that gets a month or two head-start might have the advantage of already having buyers in the diligence process.
Whenever an owner asks me about the best time to list a business for sale, I give them my hometown, Horseshoe Beach, Florida answer: There may be better times to go fishing, but you won’t catch anything if you don’t drop a line in somewhere.
I can help you decide whether this is the right time to sell your company. Find out what yours is worth here.