Should I Raise More Capital or Put My Business Up for Sale?

Entrepreneurs face a point in time when they need to decide between whether to put a business up for sale or raise more capital and build it further. They have to weigh up the benefits of selling against the chance of perhaps gaining more value in the future. 

The decision is often difficult and here are some questions that may give business owners facing such a decision more clarity. 

When is the right time to sell?

If the market is going sideways or your business growth has slowed down, your business is likely to be worth less. You don’t want to wait until your business becomes irrelevant or starts to lose its competitive edge before thinking of selling. Buyers usually give more value to a growing company so it is obviously best to sell while your business is flourishing. 

The sale process can take months and to analyze a business, many different aspects, such as cash flow, sales, assets and liquidity, need to be taken into account. Without a business assessment, it is impossible to set a realistic price. 

Peterson Acquisitions will help you to value your business so you can set a price that’s not so high you put off potential buyers or so low that buyers wonder what’s wrong with your business. 

Will business growth outweigh the cost of raising capital?

Perhaps you’re considering expanding your successful local business to a regional scale. You will need cash to hire more people, open up new locations, and advertise in the new markets. In the case of any new opportunities for growth, it is extremely important to do your due diligence before going ahead and raising capital. 

National business brokers like Peterson Acquisitions can do a business assessment for you so you have more understanding about whether you should sell or go ahead with raising capital. Getting an external, independent opinion can provide a lot of value. 

You need to establish whether the potential growth in cash flow will outweigh the cost of raising the capital. You have to consider what the downside would be for your business if your growth attempts fail. If raising more capital will give you the resources to grow your company and not jeopardize its stability, it may be worth the cost. 

Most businesses operate at a loss for the first couple of years. Ideally, initial capital should cover this period but you may run out before you start making a profit. 

A bridge loan may give you enough money to keep operating until your business becomes profitable. However, before taking out such a loan, you need to examine whether your business is feasible, know why you’re not profitable yet and what it will take to succeed. Otherwise, raising more capital will just put your business into a deeper hole. 

When interest rates are low and venture capital funds are investing heavily, it would be a good time to raise more cash if you’re sure this is what you need to do. 

Following an investment, the pressure is on to continue to build and the bar is raised to achieve a higher enterprise valuation. Even if your business has great potential for future growth and you get funding, you need to know you have the stamina to continue on the path of growth. 

The above questions about selling or raising capital provide a way for you to reflect on your own business and determine the path that best fits your overall goals and current business status. 

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