Determining the right moment to sell your company can be a complex decision, but one straightforward answer is to sell when someone else is willing to invest more in your business than you are.

In the initial stages of starting a business, your commitment and investment are unparalleled. As the founder, you’re all in, working long hours and dedicating a substantial portion of your liquid assets to propel your business forward. In these early days, the willingness to take risks is high because the business’s value is relatively low. The famous Bob Dylan lyric captures this sentiment: “When you ain’t got nothing, you got nothing to lose.”

However, as your business evolves and gains value, a shift may occur. You might find yourself becoming more conservative, and hesitant to risk the equity you’ve built on new strategies. This transformation signifies a crucial juncture where someone else may be willing to invest more time and money into your business than you are.

Peach New Media

David Will, the founder of Peach New Media, exemplifies this scenario. Will founded Peach New Media in 2000 initially as a reseller of web conferencing. He navigated through different business strategies until he found success in selling learning management software to associations. By 2015, Peach New Media had grown substantially to over 40 employees, prompting an acquisition offer from a large private equity company. Will faced a dilemma—he cherished his business and the team he had built, but the acquirer was presenting a life-changing opportunity.

Ultimately, Will realized that his own risk appetite had become more conservative with the growth of his business. The potential acquirer, on the other hand, was eager to make a substantial bet on integrating Peach New Media into its portfolio. Recognizing that the acquirer was willing to take a bigger risk than he was, Will decided to sell.

When to Sell

The key takeaway is that the point at which a buyer is willing to invest more than you are varies for each entrepreneur. It’s a dynamic balance influenced by factors such as the current value of your business, your net worth, and your risk tolerance.

Would you be willing to risk your business worth $1 million on a new strategy to bring the value of the company up to $10 million? Many owners would be willing to place that wager. Now imagine the same scenario with a $10 million company representing the majority of your personal net worth. Not as many entrepreneurs would be willing to risk their already successful business in hopes of creating a $100 million business. The risk-to-reward ratio remains the same, but the owner’s willingness to create additional value is often foregone in favour of certainty. Essentially, as the potential gains and risks increase, the willingness to take such bold bets may decrease.

Although you may be reluctant to roll the dice on your business’s future, the CEO of a billion-dollar corporation oftentimes will be willing to take that bet. Ultimately, when someone else is prepared to invest more in your business than you are, it’s a signal that the time may be right to pass the torch to a new owner.

If you’re in need of advice on how or when to sell your business, you can contact us here.