One of the questions we frequently get from business owners is “How will it take to sell my business?” This is the time from when a business owner signs our listing agreement to the closing on the sale of the business. The quick answer is that it usually takes about 6 to 9 months to sell a business. This can vary; this blog is about what the steps are that take time and how long they take. I’ll go through them, chronologically.
The first step in the process, for us, is to write the advertisement for the business (the Blind Profile) and the report(the Confidential Business Review) that a buyer receives after signing a confidentiality agreement and being approved. In order to write these, we need information from the business owner. In most cases, we already have the financial information we need because we’ve done a business valuation. We have a questionnaire that we use to write the BP and CBR. It usually takes about a week for the business owner to fill out the questionnaire. We also meet with owners to fill it out if the owner prefers. Then, our writer writes the report, the seller reviews it and the advertisement, and we start marketing the business. This whole process usually takes about 3 weeks.
The next step in the process – the time to show the business to buyers and negotiate the offer – usually is what takes the longest. Here are the most common factors that affect the time it takes to reach an agreement to sell the business:
Marketing – Business brokers vary significantly in their marketing of the businesses they sell. The more buyers our marketing reaches, the faster offers will be presented and the higher the sale price. We use several marketing methods to get more buyers and are members of a New England co-broke group to reach more buyers throughout New England. Our website gets visits from about 150 buyers a day and we have 3,000 buyers in our buyer database. All of these methods reach more buyers.
The Popularity of the Industry. Some types of businesses are more popular with buyers, such as manufacturing and distribution companies, or liquor stores and convenience stores. That means more buyers respond to the advertisements. We may use direct marketing to reach industry buyers of some businesses.
Price – Price matters. We usually know that a business is over-priced based on how many buyers are responding to our marketing and the price we have estimated the business will sell at. It is not uncommon for a business to sit on the market if it is over-priced.
Before a deal is negotiated, buyers meet with the owner, see the business, and evaluate information about the business, and present offers. This can take as little time as weeks to several months. On the average, this is about 3 to 6 months. It can take as little as a day to negotiate an offer to several weeks if either party is slow to respond.
Once the business is under agreement, it usually takes 2 or 3 months to close on the sale. During that time, the buyer does due diligence, obtains financing, negotiates a lease, and the attorneys prepare the closing documents. In some sales, other approvals are needed. For example, in the sale of a franchise, the franchisor must approve the buyer. In the sale of businesses like liquor stores and vocational schools, organizations or governments need to approve the sale. One of the variables in how long the closing process takes is people and how long they take to do their job. In one of my sales, a property management company took several weeks to negotiate the terms of the lease. Attorneys may have other clients who they need to do work for or just work more slowly. Less experienced lenders will take longer to process and approve a loan.
Although the average time to sell a business is 6 to 9 months, there are steps that buyers, sellers, and business owners can take to speed up the process. If you are selling your business, and the time it will take to sell it matters to you, consider the factors in this blog when choosing a business broker.