Perhaps you are a small business owner considering selling your business and asking yourself: “How long will it take to sell my business?” As the Mid South’s largest intermediary firm, we’ve walked through this process with hundreds of clients. While each business sale has a timeline subject to many variations, the average business sale takes somewhere between six months and two years to finalize.
Using a business broker
Once a small business owner decides to sell, he or she needs to determine whether to sell by owner or seek outside help via a business broker. Due to the complicated nature of the process, most business owners need a business broker to help with a successful sale.
The role of the business broker is similar to that of a real estate agent when selling a home. Of course, the business owner can attempt to DIY a sale, but the broker has an extensive network of contacts as well as an established marketing strategy for reaching prospective buyers. The broker ensures the owner has the proper documentation in place so that the due diligence can proceed in a more streamlined manner. Finally, the broker is an impartial professional who can mitigate issues that can arise with the business owner’s employees and advise the owner on business practices, documentation, and the perceived value of his business.
The process of selling a business
The selling process begins with a business valuation, which determines the value of a business to ensure that a business owner doesn’t accept owners for less than what the business is worth. At Alliant, our team also spends time discussing specific needs and goals of each business owner as well, to help guide the entire process from start to finish.
The business broker then markets the business to prospective buyers and prepares a Confidential Business Agreement (a document any prospective buyer receives). During this time, there are meetings, negotiations, and due diligence done. Closing generally takes place two or three months after an agreement in terml. During this time, buyers obtain necessary financing, and closing documents are drafted by attorneys.
Impacts to the timeline
Conditions that can affect the time frame of the sale include the industry (and the business’s positioning within the industry versus its competitors), economy, and price. Because most buyers will secure financing to buy, a business can sell faster when interest rates are low. Price is another important factor and business with larger price tags may take longer to find the right buyer.
Timing is also important, though not every seller has the luxury of waiting. However, there are times when owners can garner a higher premium price for their businesses. People rarely think about selling their businesses after a record-breaking year or when everything is going extremely well, but that is the precise time to sell. In the past few years, we have seen record sales of small businesses.
Another factor that could impact the sale is how intrinsic the business owner is to the future viability of the small business. It can be risky to buy a business where the perception is that a change in ownership could affect its future success. An intangible situation could also be the owner’s readiness to relinquish the business. He or she may have created and grown the business over a period of years, and while selling is the preferred option, the reality of it can sometimes be difficult and can cause delays.
Selling your business can actually be a fairly painless and straightforward process when you have the right business broker on your side. From the business valuation to closing, a professional business broker can greatly reduce the timeline of the entire process.
If you think 2020 is your year to sell a small business, keep in mind it may still take months to finalize everything. Don’t miss the chance to capitalize on the current favorable market, contact us today to see how we can help you discover the real value of your business!