THE DANGER OF MARKET TIMING THE SALE OF YOUR BUSINESS

A man is sitting at a table with a laptop and shaking hands with a man.

The other day I was speaking with a successful CEO in his fifties who runs a heating and air conditioning company generating eight million dollars in revenue and over one million dollars in profit before tax. 


Even though he was tired and nearing burnout, he was planning to wait another five to seven years before selling his business because he “wanted to sell at the peak of the next economic cycle.” 


On the surface, his rationale seems to make sense. If you speak with mergers and acquisitions professionals, they’ll tell you that an economic cycle can impact valuations by up to “two turns,” which means that a business selling for five times earnings at the peak of an economic cycle may go for as low as three times earnings at a low point in the economy. 


The problem is, when you sell your business, you have to do something with the money you receive, which usually means buying into another asset class that is being affected by the same economy. 


Let’s say, for example, you had a business generating $100,000 in pre-tax profit in an industry that trades between three times earnings and five times earnings, depending on the point in the economic cycle. 


Furthermore, let’s imagine you sat stealthy on the sideline until the economy reached the absolute peak and sold your business for $500,000 (five times your pre-tax profit) in October 2007. You took your $500,000 and bought into a Dow Jones index fund when it was trading above 14,000. Eighteen months later – after the Dow Jones had dropped to 6,547.05– you’d be left with less than half of your money. 


Even though you cleverly waited till the economic peak, by March 9, 2009, you would have effectively sold your business for less than 2.5 times earnings. 


The inverse is also true. Let’s say you waited “too long” and sold the same business in March 2009. And because you were at the lowest possible point in the economic cycle, you only got three times earnings: $300,000. Notice that’s 20% more than if you’d sold at the peak and bought an index fund at the top of the market. 


Just like when you sell your house in a good real estate market, unless you’re downsizing, you usually buy into an equally frothy market. Which is why timing the sale of your business on external economic cycles is usually a waste of energy. 


External vs. internal economic cycles 


Instead, I’d recommend timing the sale of your business when internal economic factors are all pointing in the right direction: employees are happy, revenue and profits are on an upward trend, and there is still lots of market share for an acquirer to capture. 


When internal economic factors are pointing up, you’ll fetch a price at the top end of what the market is paying for businesses like yours right now, which means that – for good or bad – you get to use your newfound cash and buy into the same economic market you’re selling out of. 

Get Free Business Valuation

or

Schedule Free Consultation

Recent articles for you

How to Double Your Chances of a Premium Acquisition Offer

By Kim Santos • April 21, 2025
Value Builder Analytics, drawing on proprietary data from over 80,000 business owners, found that companies that can run without the owner for at least three months are twice as likely to receive an acquisition offer above 6x EBITDA. The concept is simple. The execution? Not so much. Take Kristie Shifflette for example. She was an early master franchisee with Orangetheory Fitness, a one-hour, coach-led workout that uses heart rate zones to boost calorie burn during and after exercise. When she opened her first location, she did it all—marketing, hiring, payroll, and even handling construction headaches. It worked but only because she was working constantly. As she expanded, things started to break. With two locations, she was stretched. At three, it became clear: The model only worked when Kristie was the model. She knew she needed to change. Kristie stopped focusing on being in the business and started focusing on building the business. From Operator to Owner Kristie started documenting everything. From pre-sale processes to day-to-day studio operations, Kristie developed detailed playbooks that codified exactly how her Orangetheory locations should run—without her. She created a compensation structure for studio managers that gave them ownership over their results: modest base salaries paired with meaningful bonuses tied to net member growth and total revenue. Top-performing managers could double their pay, and they were treated like mini-CEOs with full responsibility for their studio’s performance. By the time she sold her business, Kristie had built a company with 13 locations generating well north of $10 million in annual revenue. Some of her top-performing studios, like the Chapel Hill location, were bringing in revenue of $2 million a year, with EBITDA margins around 40%.  Kristie’s story includes an important lesson: Make yourself less essential, and your business becomes more valuable. If you’re still the one opening the door in the morning and locking up at night—literally or metaphorically—it’s worth asking: What would break if I stepped away for 90 days? Start there. Whether it’s building a playbook, empowering your team, or simply learning to let go, taking even one step toward reducing your involvement makes your company not just more valuable but more enjoyable to own.

Why Imperfections in Your Business Don’t Make It Unsellable

By Kim Santos • April 14, 2025
For business owners considering their endgame, learning what makes a company valuable can feel overwhelming. Buyers prioritize factors like recurring revenue, a differentiated product or service, and a leadership team that operates independently from the owner. If a business doesn’t check every box, it can seem as though selling is perpetually just out of reach. But perfection is not a prerequisite for a sale. While improving the key drivers of value is important, an imperfect business can still be highly desirable to the right buyer. In fact, some acquirers actively look for businesses with fixable flaws because they see an opportunity to increase value. Blake Hutchison on Why Imperfections Can Be to an Acquirer’s Advantage Blake Hutchison, CEO of Flippa, has witnessed thousands of business acquisitions. Flippa is an online marketplace where business owners can buy and sell companies, particularly small to mid-sized digital businesses. The platform connects sellers with buyers looking for opportunities to grow or optimize an acquisition. In a recent Built to Sell Radio interview, Hutchison explained that many business owners assume their company won’t attract buyers because it has shortcomings. In reality, most acquirers aren’t looking for perfection—they’re looking for potential. Many buyers have a strategic advantage, whether it’s a strong distribution network, operational expertise, or access to capital, that allows them to take an imperfect business and make it more valuable. A prime example of this is the acquisition of PetCoach. How PetCoach Turned an Imperfection into a Selling Point PetCoach, co-founded by Brock Weatherup, was a two-sided marketplace designed to connect pet owners with veterinarians. The challenge for any marketplace business is keeping both sides in balance—generating enough demand from pet owners while ensuring there are enough veterinarians to meet that demand. PetCoach had built a strong product, but it lacked a broad distribution channel to acquire pet owners at scale. Without a solution, growth would remain limited. Instead of seeing this as a dealbreaker, Weatherup positioned it as an opportunity for the right buyer. That buyer was Petco. With more than 1,500 locations across the U.S., Mexico, and Puerto Rico, Petco had access to millions of pet owners. By acquiring PetCoach, Petco could instantly expand its offerings while solving PetCoach’s biggest challenge. Weatherup didn’t need to fix the scalability issue before selling. He needed to find an acquirer for whom the business’s weakness was actually a competitive advantage. Your Business Has Value—Even if It’s Not Perfect This doesn’t mean business owners should ignore the fundamentals of value creation. Strengthening factors like recurring revenue, customer retention, and operational efficiency will always increase a company’s attractiveness. However, not every issue needs to be resolved before an exit.  Instead of viewing imperfections as obstacles, business owners should consider how an acquirer might perceive them: A company struggling with customer acquisition may be a great fit for a buyer with an established customer base. A business with inefficient operations might attract an acquirer with expertise in streamlining processes. A company overly dependent on its owner could be appealing to a buyer with a strong leadership team ready to step in. As Blake Hutchison explains, acquirers are often looking for businesses where they can add value. The key is to position the company in a way that highlights its strengths while framing its imperfections as untapped potential. The right acquirer won’t see weaknesses as dealbreakers—they’ll see them as opportunities.

Supplier Dependence: The Silent Killer of Business Valuations

By Kim Santos • April 7, 2025
Supplier risk can erode the value of your company. When a potential acquirer examines your business, they look for red flags. A major one: relying too heavily on a single supplier—whether that’s a sole raw material provider or a platform like Amazon that controls your primary sales channel. If that key supplier vanishes or changes terms, your profits might vanish as well. This risk often leads to lower valuations in the eyes of buyers. Why Supplier Risk Hurts Valuation Over-dependence on one supplier—or on a single selling channel—makes you vulnerable. Buyers don’t like gambling on a business that hinges on factors outside the owner’s control. If an online marketplace tweaks its algorithm or suspends your account, your revenue may plummet. Acquirers see this fragility and adjust their offer downward. Adi Gullia’s Diversification Example Entrepreneur Adi Gullia saw this firsthand. He built his beauty brand, Grace & Stella, on Amazon’s platform. At first, it looked like a goldmine—his foot-peeling mask soared to $100,000 in monthly sales within nine months. Yet Adi recognized the risk. He knew Amazon could change rules or restrict listings at any moment, putting his entire business at risk. Instead of waiting for that to happen, Adi expanded. He forged relationships with subscription box partners to reach new customers outside Amazon’s control. Next he launched his own ecommerce site, selling directly to consumers. Adi also ventured into retail, signing a major deal with Target. These partnerships allowed him to diversify his revenue streams and build a more resilient business. Retailers like Target appreciated Grace & Stella’s success on Amazon, which served as proof of demand. By reducing his dependence on any single channel, Adi created a business that acquirers found far more appealing. The Impact on Valuation When it came time to sell, Adi’s diversification efforts paid off. His company fetched a valuation of 5.8 times EBITDA—a significant premium over what a typical Amazon reseller might expect. Most Amazon-only brands are valued at three to four times EBITDA, reflecting the higher risks tied to their reliance on the platform. Buyers of Amazon-centric businesses worry about potential account suspensions, de-listings, or increased competition driving down margins. Adi’s diversified revenue streams mitigated these risks, making his business more stable and attractive to acquirers. Practical Steps to Lower Supplier Risk 1. Add Channels : If you rely on one marketplace, consider starting your own ecommerce store. Test alternative platforms or retail partners. 2. Secure Multiple Suppliers : If raw materials come from one producer, find a backup or two. Even if your costs rise slightly, you’re buying peace of mind. 3. Build Direct Relationships : Capture customer data through your own site. Invest in ways to reach buyers directly—email, social media, subscriptions—so no single platform can cut you off from your audience. Conclusion Supplier risk is a value killer. Buyers pay less for a company balanced on a single weak pillar. Don’t let one supplier or one platform control your future. Take a page from Adi Gullia’s playbook. By branching out to retail with Target, leveraging subscription boxes, and launching an ecommerce site, he reduced his supplier risk. These moves not only stabilized his business but also helped him command a premium valuation. At 5.8 times EBITDA, Adi’s sale was far above the norm for Amazon resellers—proof that diversification strengthens both your business and its ultimate value.