How to Sell a Tech Company: 5 Clear Indicators It’s Time to Sell Your Business
June 22, 2023
So, you’re thinking about selling your tech company?
Perhaps you’ve built an innovative business, brought in customers, and raked in revenue. But for whatever reason, you’re thinking about calling it quits and you’re wondering if it’s time to sell?
Well, the good news is, there’s big money in tech. Particularly with the recent rise of AI tech and tools for test execution in software testing. In fact, the tech industry was valued at $5.3 trillion in 2022.
But despite the money pouring into the industry, is now really the right time to sell?
In this article, we’ll take a closer look at five signs that indicate it’s time to sell your business.
5 Clear Indicators It’s Time to Sell Your Business
1. You’ve Done a Thorough Assessment
Any decision to sell a business should be thoroughly thought through. What you don’t want to do is make a quick decision and get sellers’ regret later.
Take some time to do a clear assessment and an in-depth look at your business. This includes looking externally and considering the market and your competition before selling.
Let’s look at some general pointers to help you with your assessment.
Assessing your business
You need to take a birds-eye view of your business. This means asking some important questions about your organization. These might include:
- Can you still offer your customer the value they’re looking for?
- What is the state of your gross margins?
- What are your levels of revenue?
- Do you have acceptable levels of net profit?
Assessing your competition
The state of your competition should also play a big part in your decision. Falling behind your competition can be disheartening, and you may feel less optimistic about continuing your business. Buyers may also be less willing to invest in a business with dropping success rates.
When assessing your competition, think about some of the following factors:
- How much of the market do your competitors control?
- Has a new competitor entered the market, introducing the next “big thing”?
- Is your market share decreasing as competitors get bigger?
- Do you need to make significant alterations to remain competitive?
Assessing your industry
Image sourced from zippia.com
As mentioned, the tech industry is currently undergoing an exciting time. People are hungry for the latest and greatest tech products.
If you sell up now, you may get a good deal. But you may also lose the chance to profit from such a booming industry.
On the flip side of this, the tech industry is quickly becoming more crowded and some areas are experiencing a significant downturn. You may struggle to find a buyer without a strong value proposition.
Adding additional revenue streams and sales channels is a good way to increase the profitability and growth potential of your business.
Exploring alternative avenues like online marketplaces such as Etsy can provide opportunities for revenue generation. Understanding how to make money on Etsy can be a valuable consideration as you assess the potential profitability of your tech business.
2. You’re Feeling Burnt Out
Let’s face it, running a business takes a lot of effort. And it’s not uncommon for entrepreneurs to lose steam and enthusiasm as they start to max out their ability to grow the business further.
Many entrepreneurs are so focused on scaling their businesses that they don’t spot the signs of burnout. They continue on, and the situation becomes worse and worse. If any of the following signs are familiar to you, you might be burnt out.
- You regularly feel tired or drained.
- You feel overwhelmed by the process of running your business.
- You have a negative outlook on the future.
- You’re often procrastinating to avoid doing important tasks.
If you’re burnt out, your business will suffer. You won’t have the same levels of enthusiasm, and this will impact your work. Your employees will spot that leadership seems detached, and this will affect their work ethic. After all, what’s the point of working hard if leadership isn’t invested?
Recognizing burnout is never easy. This is especially true if you’ve been running a business for a long time. But the quicker you recognize the issue, the better for you and your company.
3. You’re Looking for New Challenges
Entrepreneurs are always looking for the next big opportunity, and many simply aren’t happy about staying in the same role for too long. Your business might be doing well, but this doesn’t mean much if you’re feeling unfulfilled.
If you want the thrill of chasing the next challenge, it’s worth assessing your business to make sure you haven’t missed any interesting growth opportunities before you make your exit.
There might be new challenges that you could tackle within your organization. Consider expanding your role to take on new tasks.
If, after careful consideration, you still feel unsatisfied and things still feel stagnant, it’s probably time to sell.
4. The Market Looks Stable
Free to use image sourced from Unsplash
As every business owner knows, there are sometimes factors outside your control. The market is an ever-changing entity. The skies can look sunny one day and stormy another.
With that in mind, investors are generally going to be less willing to put resources into unstable markets. So, if you’re going to sell, try to pick a time when market forecasts are relatively stable.
It could take some time to sell
Selling a business can take a long time—the average now is ten months. During this time, you’ll have to remain at the helm, and weather any storms that may come your way. This includes downturns in the market.
Is your business recession-proof?
Free to use image sourced from Unsplash
If you must sell during a time of market turmoil, it’s better to be well prepared. Have you
- Budgeted carefully?
- Built an emergency fund?
- Avoided making knee-jerk investments?
- Taken full stock of your finances?
- Applied a QA process to your risk management procedures?
Ultimately, there are some aspects of a recession that you simply can’t prepare for. With a clear plan, though, you can better weather the storm and emerge even stronger.
With the right approach, your business can still look attractive during a recession.
5. You’ve Weighed Up the Cons
When thinking of how to sell a tech company, remember there can be some pretty big downsides.
If you don’t give this enough thought, you might end up regretting your choice. Of course, disadvantages will range from business to business.
You might not get the right deal
You can sell your business, but will you get the deal you want? The Season of the Seller is well and truly over, so you can say goodbye to the sky-high multiples we experienced from 2020 – 2022.
You’ll likely find that buyers aren’t willing to spend as much as you had predicted. Factors like the market can also affect the kind of deal you get and leave you disappointed.
It can be an emotionally taxing process
You’ve probably put a lot of time and effort into your business. You may have spent sleepless nights thinking about how to grow the business or overcome challenges. So whilst the idea of selling might be attractive now, letting someone else take the reigns could be more painful than you think.
Time to sell?
Free to use image sourced from Unsplash
Wondering how to sell your tech company? First, ask yourself, “Is now the right time?”
In the end, only you can answer that question. Selling can have lots of benefits. You could get a good deal for your company and open the door to new projects and horizons. But as we’ve seen, selling isn’t without risk. You might get a bad deal or even regret selling in the first place.
If you are ready to sell your business, create an account on our site, or use our free valuation tool to find out how much your business may be worth.
