How long does it take to sell a business: What business owners can expect
August 21, 2023 ⋅ 9 min read
Selling a business is no small feat. For owners of small businesses who have poured endless amounts of time, money, and energy into building their company, the decision to sell can be exciting — and daunting.
Whether you’ve decided to sell or not, you may be wondering how long it will take to sell your business. The timeline for selling a business isn’t so straightforward and can vary widely depending on the industry, location, and your company's financial health.
It helps to understand the complexities of the selling process to make a strong exit strategy. In this article, we’ll walk you through how long it can realistically take to sell a business and what you can expect during the selling process.
A quick timeline overview for selling a business
Here’s a brief timeline overview for selling a business, including key steps and considerations to keep in mind throughout the lengthy process.
Step 1: Preparing your business
Before putting your business up for sale, it's important to make sure it's in the best possible position for potential buyers. This may involve getting a professional assessment of your business's value (we can help!), addressing any legal or financial issues, optimizing your business operations, and creating a detailed marketing plan.
Step 2: Sourcing potential buyers
Once your business is ready for sale, the next step is to find potential buyers who are interested in acquiring your business. This can involve reaching out to industry contacts, hiring a business broker, or even using online marketplaces to advertise your business to a wider audience.
Step 3: Negotiating a deal
Once you've found potential buyers, the next step is to start negotiating a deal. This involves agreeing on the terms of the sale, including the sales price, payment structure, and any other key details.
Step 4: Due diligence
Before finalizing the sale, the buyer will typically conduct a due diligence process to verify the accuracy of your financial statements and assess any potential risks associated with the business. This can be a stressful and time-consuming process, but it's an important step to ensure that both parties are fully informed and comfortable with the sale.
Step 5: Closing the deal
Assuming the due diligence process goes smoothly, the final step is to close the deal and transfer ownership of the business to the buyer. This typically involves signing a purchase agreement and other legal documents, as well as transferring any assets or licenses associated with the business.
Overall, the selling process for a business typically takes several months to a year or more, depending on the complexity of the business and the market conditions.
Is it hard to sell a business?
There are several factors that can make it difficult to sell a business, including economic conditions, competition, and industry trends. A lack of profitability, poor management, or legal issues can also make a business less attractive to most buyers.
The selling process can be time-consuming and emotionally challenging for business owners who have invested years of their lives into building their company. It's important to have a solid understanding of your business’ industry to increase the odds of a successful sale.
How much should a small business sell for?
To understand how much your business should sell for, you should first consider the current value of your business. You can do this by looking at your financial statements and assessing the value of your assets, liabilities, and cash flow.
Additionally, factor in your business's organic growth potential and its position in the market. Comparing your business to others in the same industry can help you determine a fair market value for your small business.
The sale price should ultimately be agreed on by both the seller and the buyer, and should reflect the true value of the business.
Even if you’re not quite ready to sell, Baton can help you get an accurate valuation of your business and provide the tools and action plan you need to increase your valuation.
How your industry affects how fast your business sells
There are other factors that can impact just how quickly the sale will be finalized. One key factor is the industry that your business operates in.
For example, businesses that operate in hot industries with a lot of buzz and competition may sell more quickly simply because there are more buyers in the market. Businesses in slower-moving or less popular industries may have a harder time finding a buyer, extending the sales process.
Businesses that require specialized knowledge or expertise, such as those in the medical or technology fields, may take longer to sell due to the complexity of the industry and the need for specialized buyers.
Can buyers affect the time it takes to sell your business?
The buyer's role in the selling process is significant. When several buyers are interested, it can create a competitive atmosphere and lead to higher offers. But, too many unqualified buyers can lengthen the time to complete the selling process, because it takes time and effort to properly vet each buyer.
How multiple prospective buyers can impact selling performance
When you have multiple prospective buyers interested in purchasing your business, it can increase the demand for your company. This can improve your business's sales prospects and speed up the process as buyers may compete with each other to purchase your company. You may be able to negotiate a better price and more favorable terms with multiple buyers vying for your business.
How not having pre-qualified buyers can slow a business sale
Not having pre-qualified buyers can slow the selling process. Pre-qualification is the process of verifying a prospective buyer's financial ability and readiness to purchase your business. This step ensures that the buyer has the necessary resources to complete the transaction, and avoids wasting time on buyers who lack the buying power needed to purchase your business.
With unqualified buyers, the due diligence process may take longer. You'll need to spend more time verifying their financials, checking credit reports, and other metrics. If a buyer falls through at the last moment due to a lack of pre-qualification, all previous effort spent preparing for the transaction becomes sunk-cost, delaying the sale.
How pre-qualified buyers speed up the sale of a business
When prospective buyers have provided financial statements and been vetted for eligibility, you can be confident that they're serious about buying your business, which can shorten the transaction time.
Prequalified buyers are generally more motivated to complete the transaction. They are well aware of the selling process’s requirements and will have a better understanding of the documents needed.
How your business’ finances can impact selling timeline
If your business is in decline, it may take longer to find a buyer who is willing to invest in it. If your business is thriving, the process may move more quickly.
In order to attract potential buyers, it's important to have all of your financial information in order. This includes your profits, losses, cash flow, and any other relevant financial data. Buyers will want to see that your business is profitable and has steady growth potential in order to justify the asking price.
How different funding sources can impact the sales timeline
Different financing options can affect the sales timeline, as well as the potential buyer pool. If you’re able to offer seller-financing, this may be an attractive option for buyers who may not have the necessary capital upfront. If a buyer uses financing options like SBA loans or traditional bank financing, the lending process may take some time.
Buyers who have access to financing options may be more likely to move forward with a purchase, which can ultimately shorten the sales timeline.
Can the owner’s role in the company slow a business sale?
The short answer is that it depends on the nature of your involvement. As the owner, you likely play a significant role in the day-to-day operations.
If you're the sole decision-maker and actively involved in all aspects of the business, a potential buyer may be wary of acquiring the company if they fear losing your expertise. But, if you have a strong management team in place and can transition your responsibilities smoothly, your continued involvement could actually be a selling point.
How recurring revenue impacts a business's selling timeframe
Recurring revenue can have a significant impact on the timeframe it takes to sell a business. Buyers are often drawn to companies with predictable and stable cash flows, and recurring revenue provides just that.
By having customers who renew their contracts or subscription services regularly, a business can demonstrate its ability to generate consistent revenue over a certain period.
This type of revenue minimizes the risks for the buyer, making the acquisition process more attractive and potentially accelerating the timeframe of the sale.
How can I sell my business faster?
Selling a business, on average, takes between 6-9 months. The good news is that there are several ways to expedite the process and ensure a successful sale.
How business brokers and advisors affect the business sale timeline
One way to speed up the sale of a business is by seeking professional advice from experienced advisors. These experts can help you navigate the complexities of a business sale and provide valuable insights into what buyers are looking for.
Working with an advisory firm or business broker can also make all the difference when it comes to selling your business quickly. These firms have a robust network of buyers, access to market data and trends, and can offer valuable insights into the best practices for preparing your business for sale.
Why do brokers often require 12-month exclusive contracts?
If you're considering working with a broker, it's important to note that they often require a 12-month exclusive contract. While this may seem like a long time, it's essential to remember that selling a business isn't a quick process. This time frame allows brokers to build relationships with potential buyers, market your business, and negotiate the best deal on your behalf.
Accelerate your business sale with Baton
Working with Baton instead of a traditional broker can be a faster process. Baton's platform helps match business owners with pre-vetted, qualified buyers that are looking for companies like yours. Baton also streamlines the sales process by providing data-backed listing price analysis, professionally written marketing materials, and detailed best-in-class data rooms to support a quicker and smoother sales process.
Selling a business is a complex process that takes time and careful planning. As a business owner, understanding the steps involved and having realistic expectations can help make the process smoother and less stressful.
Because the process could take anywhere from a few months to several years, it's important to have a team in your corner. Baton can be your partner throughout the process, working with you to maximize your valuation and connecting you with professionals in our vetted network of advisors. Start your journey by contacting us today!