We are receiving unsolicited offers now, but our growth metrics suggest we could double our valuation in four years. How do we model the flow cost of waiting versus the immediate risk of a market downturn?

Deciding whether to sell now or wait is a strategic decision that can be modeled using a real options framework. You must weigh the immediate liquidity of an exit against the flow cost of waiting under market uncertainty.

The flow cost of waiting includes your ongoing capital expenditures, the risk of competitive disruption, and the personal energy you must expend to drive that future growth. Start by calculating your current valuation based on today's EBITDA and market multiples. Next, project your future valuation in four years, factoring in the cost of the operational upgrades and AI integrations required to hit those targets.

You must also factor in the probability of a market multiple contraction over that period. If a downturn occurs, your multiple could drop, wiping out the gains of your revenue growth. If the flow cost of waiting, combined with the risk of market volatility, exceeds the realistic net present value of your future exit premium, selling now is the rational choice. Use your quarterly strategic sessions to run these numbers objectively. Never let emotion or optimistic projections blind you to the tangible costs of delayed liquidity.

Category: Exit Planning