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Know When It's Time to Sell Your Business

John Warrillow, founder of The Sellability Score, explains why you need to begin planning a sale several years earlier than you'd think.
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Video Transcript

00:10 John Warrillow: A lot of people ask me, "When is the right time to sell?" And I think if you look at the way entrepreneurs think about selling their business, they think about the 400-meter relay. You know in a 400-meter relay, when one runner passes the baton to another in this dramatic moment. They touch, and then the second runner goes off down the racecourse. And in their mind, I think a lot of entrepreneurs think that's what selling your business is like. They'll take it 100 miles an hour to the finish line, and they'll just pass the baton over as they gasp for breath and kind of recover. Reality is that selling a business is a lot more intertwined, and typically when you sell a company you've got to stay on, on average for three years. The average earn out in the United States is a three-year term, that's when you stay on as an employee of a company.

00:58 Warrillow: Can be as long as five years, can be as few as one. But typically it's three years, during which time you are an employee of a company. Usually it takes 6-12 months to sell your business, so if you add one year plus three years, that's a four-year span of your life. And so, for most people they've got to move up their sell by date by at least four years. If for example you say, "By age 50, I wanna be on the beach." You really need to actually start selling your company at age 46.

Last updated: Nov 29, 2013

JOHN WARRILLOW | Columnist | Sellability

John Warrillow’s new book, The Automatic Customer: Creating a Subscription Business In Any Industry will be released on February 5, 2015. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You and the founder of The Sellability Score, a company dedicated to helping business owners improve the value of their company.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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