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From Valuation to Closing: Understanding the Business Sale Timeline

Team Acquira
-  December 15, 2023
What You’ll Learn
  • What factors influence the timeline of selling a business
  • How pricing affects the speed of finding a suitable buyer
  • What role financing availability plays in expediting or delaying the selling process
  • How the type of industry and geographical location impact the time it takes to sell a business
  • What the key strategies to streamline the closing process and sell your business faster

If you’re a business owner thinking about selling your company, you’re likely curious about one key question: How long does it take to sell a business? 

The answer to this question isn’t a one-size-fits-all proposition. Instead, it’s a complex puzzle that depends on a multitude of factors. 

Early preparation from you as the seller can certainly help speed things along, but the entire process will likely take somewhere between several weeks (in the most optimistic scenario) to many months, even a year or more. 

Let’s delve into all the factors that affect how long it takes to sell a business.

Factors Influencing the Timeline of Selling a Business

Before diving into specific timeframes, let’s dissect the factors that influence the duration of selling a business. 

These elements can vary widely from one situation to another and often overlap, making the process dynamic and nuanced.

1. Selling Price

The price at which you’re willing to sell your business plays a fundamental role in determining how long it takes to find a suitable buyer. If you’ve set an unrealistically high selling price, you might wait for an extended period with no takers. Conversely, pricing your business too low might attract quick offers or a bunch of tire kickers, and you could end up leaving money on the table. Striking the right balance is essential.

2. Asking Price vs. Selling Price

It’s crucial to understand that the asking price and the actual selling price can differ significantly. Negotiations are a standard part of selling a business. Potential buyers may make counteroffers, which can lengthen the process as you work towards an agreement that both parties find acceptable.

3. Multiple of SDE or EBITDA

Buyers often evaluate businesses based on their Seller’s Discretionary Earnings (SDE) or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). The multiple of SDE or EBITDA you expect can affect the time to sell. Businesses with higher multiples may take longer to find suitable buyers.

4. Financing

The availability of financing options can expedite or prolong the selling process. If potential buyers struggle to secure funding, it can extend the timeline. Conversely, buyers with readily available financing can move quickly to finalize the deal.

5. Industry

The type of industry your business operates in can significantly affect the time it takes to sell. Some industries are more attractive to buyers and may experience faster sales. Others, especially those facing challenges or declining markets, may require more time to find the right buyer.

6. Location

The geographical location of your business also plays a role. Businesses in prime locations with high demand may attract buyers more swiftly. In contrast, businesses in less desirable areas may face a longer wait. A growing population, based on Acquira’s experience, is an attractive component for many savvy business buyers. 

7. Marketing

Efficient and targeted marketing can speed up the selling process. Being proactive in showcasing your business across multiple channels can help you shorten the timeline.

8. Economic Factors

Economic conditions, both at the local and global levels, can affect the pace of selling a business. During economic downturns, buyers may be more cautious, leading to a more extended selling timeline. Conversely, robust economic conditions can speed up the process.

9. Structure & Organization

Having a well-organized business with clear financial records, contracts, and operational systems in place can expedite the selling process. Buyers appreciate transparency and are more likely to move quickly when everything is in order. Having a business that is run by a management team and isn’t dependent on a single owner-operator is also likely to appear more attractive.

10. Type of Buyer

The type of buyer you’re dealing with can also influence the timeline. There are three primary categories of buyers: individual buyers, private equity groups, and strategic buyers. Each group has its own unique considerations and may require different amounts of time to complete the transaction.

11. Dissemination of Information

How and when you disclose information about your business can impact the selling timeline. Providing relevant information to potential buyers promptly can build trust and expedite negotiations.

Preparation Phase

how long does it take to sell a private company

Now that we’ve laid the foundation by understanding the various factors influencing the timeline of selling a business, let’s dive deeper into the crucial phases that can significantly affect the speed and success of your business sale.

The first is the preparation phase. It is key to a smooth and efficient business sale. 

It involves several essential steps that can help you attract potential buyers more efficiently and enhance the overall process.

Before listing your business, consider conducting a thorough financial audit. 

This step involves scrutinizing your financial records, including income statements, balance sheets, and tax returns. 

Audited financials instill confidence in buyers and can expedite the due diligence process, as they have access to accurate and well-documented financial information.

Organize and update all relevant documentation. 

This includes contracts, customer lists, employee agreements, and any other vital records. 

Well-organized documentation streamlines negotiations and reassures buyers that your business is well-maintained and transparent.

Having a realistic and well-documented business valuation is crucial. 

Overpricing or underpricing your business can lead to delays in finding the right buyer. 

Engaging a professional business appraiser can help you determine a fair market value, enhancing your chances of a swift and profitable sale.

Marketing and Exposure

Once your business is prepared for sale, it’s time to ensure that potential buyers are aware of your opportunity. 

Marketing and exposure play a significant role in attracting interested parties.

Marketing Strategies: Consider implementing a comprehensive marketing strategy. This includes creating an enticing business profile or prospectus that highlights the strengths and potential of your business. Employing both online and offline marketing tactics can help you reach a broader audience.

Online Platforms: Utilize online business-for-sale platforms to your advantage. These platforms, such as business listing websites and social media, can provide broad exposure to a global pool of buyers. Posting detailed listings with high-quality photos and accurate descriptions can generate interest quickly.

Professionals: Engaging a professional business broker or intermediary can streamline the marketing process. Acquira can be a key ally in this process. These experts have networks of potential buyers and can match your business with qualified prospects, potentially reducing the time to find the right buyer.

Networking: Don’t underestimate the power of networking within your industry. Attend industry events, join relevant associations, and tap into your professional contacts. Word of mouth can be a powerful tool in attracting potential buyers.

Don’t forget to contact Acquira. If your business falls within our investment thesis, we’ll buy it with zero fees to you. If it falls outside of our criteria, we can introduce you to one of our trusted broker partners. 

Negotiation and Due Diligence

As potential buyers show interest, you’ll enter into negotiations and due diligence, which are critical phases that can impact the timeline.

Negotiation Stages: Negotiations can be protracted, as both parties seek to strike a mutually beneficial deal. Be prepared for discussions on price, terms, and contingencies. Flexibility and open communication are essential to keep negotiations moving forward.

Due Diligence: Buyers will conduct due diligence to verify the information you’ve provided and assess the risks associated with the purchase. Due diligence can be time-consuming, involving detailed reviews of financials, contracts, legal matters, and operational procedures. Being organized and responsive during this phase can help expedite the process.

Legal and Regulatory Processes

how long does it take to sell

Navigating the legal and regulatory aspects before sealing the deal can sometimes cause delays.

Ensuring that all legal matters are in order and addressing any potential obstacles promptly is crucial.

Sometimes, regulatory approvals may be necessary, especially if your business operates in a heavily regulated industry. These approvals can add time to the selling process, so it’s essential to identify potential hurdles early and work with legal professionals who specialize in your industry.

Financing Options

While we’ve briefly touched on buyer financing earlier, it’s essential to delve deeper into how these options can impact the closing timeline. 

Buyers may rely on various financing methods, including personal funds, loans(SBA or bank loans), or even seller financing. Often it is a combination of all three. 

SBA loans are often more attractive for buyers with more generous repayment terms but are usually slower than a traditional bank loan.

The availability and approval of these financing options can significantly influence how quickly a deal can be finalized. 

Buyers with secure financing in place can proceed swiftly, while those still seeking funding may introduce delays.

Streamlining the Closing Process

A smooth closing process can expedite the sale. To ensure a quicker and smoother transition, here are some tips:

  • Due Diligence Preparedness: As mentioned previously, being prepared during the due diligence phase is crucial. Ensure all requested documents and information are readily available. Proactive preparation can lead to faster due diligence completion.
  • Clear Communication: Maintain open and clear communication with the buyer. Promptly address any inquiries, concerns, or requests for additional information. Effective communication can prevent misunderstandings and unnecessary delays.
  • Legal and Financial Assistance: Seek legal and financial expertise to navigate the intricacies of the closing process. Having professionals who specialize in business sales like Acquira can help you avoid common pitfalls and streamline the legal and financial aspects of the deal.
  • Contingency Planning: Anticipate potential roadblocks and develop contingency plans. Being proactive in addressing issues that may arise can prevent them from becoming significant obstacles that prolong the closing.

How to Sell Your Business Faster?

purchase of business timeline

Now that we’ve examined the various phases of selling a business, let’s consolidate our knowledge into practical steps to expedite the process:

Valuation: Start with a realistic and well-documented business valuation. Avoid overpricing or underpricing, as this can lead to unnecessary delays. Engage a professional appraiser to determine a fair market value.

Financing: Encourage potential buyers to secure financing early in the process. Buyers with financing in place can move quickly, reducing the timeline.

Exit Strategy: Plan your exit strategy well in advance. Knowing your goals and preferences can help you make informed decisions during negotiations and avoid unnecessary delays caused by indecision.

Keep Your Business on the Market: Don’t take your business off the market until you’ve reached a firm agreement with a buyer. Keeping it available can attract multiple potential buyers, increasing the chances of a swift sale.

Prepare for Due Diligence: Organize your business documents and financial records before listing your business for sale. Being prepared for due diligence can accelerate the process and instill confidence in buyers.

FAQs

Let’s address some frequently asked questions regarding selling a business:

Is It Hard to Sell a Business? 

Selling a business can be challenging, but with the right preparation, strategy, and professional guidance, it can be a successful and rewarding process.

How Long Does It Take to Take Over a Business? 

The time it takes to take over a business depends on the complexity of the transaction and any legal and regulatory requirements. It can vary from a few weeks to several months.

How Long Does it Take to Sell a Business Once You Have a Buyer? 

Even with a willing buyer, the time it takes to complete a business sale can range from several weeks to a year or more, depending on various factors such as due diligence, negotiation, financing, and legal processes.

Can I Sell My Business If It Is Not Profitable? 

Yes, it is possible to sell a business that is not profitable, but it may be more challenging. Buyers may be interested if they see potential for improvement or strategic value in your business. Pricing and negotiation become critical in such cases.

Conclusion

Selling a business is a complex and dynamic endeavor influenced by many factors.

Selling a business is a complex and dynamic endeavor influenced by many factors. 

From the initial contemplation of the selling price to the final closing, each stage requires careful consideration and strategic planning. 

The preparation phase sets the foundation for success, emphasizing financial audits, documentation, and accurate business valuation.

Understanding the impact of buyer financing options and streamlining the closing process are key to expediting the sale. To sell your business faster, focus on valuation, financing readiness, exit strategy, market presence, and thorough due diligence preparation.

If you’re thinking about selling your small business, consider reaching out to Acquira for a FREE business valuation and to see how our industry experts can help you get the maximum payout with the least amount of hassle. 

Key Takeaways

  • Selling a business’s timeline varies but generally takes several weeks to many months.
  • Factors influencing the timeline include pricing, financing, industry, location, and marketing.
  • Preparation, organized documentation, and a realistic valuation are crucial for a successful sale.
  • Encourage buyers to secure financing early, plan an exit strategy, and keep your business on the market.
  • Effective communication, legal and financial assistance, and contingency planning streamline the closing process.
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