When considering ‘A Timeline for Selling Your Business: How Long Does It Take?’, it’s understood that precise predictions are challenging. However, certain elements consistently influence the duration. Collaborating closely with business brokers allows business owners to better define the sales process, making controllable factors more assessable and timelines more foreseeable. It’s essential for sellers to be aware of these fundamental timeline components as they map out their exit strategy.
So, how long does it take to sell a business? Since every business and situation differ, a trustworthy business broker will work with a client to provide an estimate based on the current conditions. Here are some basic phases of a sale and their average timelines.
The Preparation Phase
When mapping out ‘A Timeline for Selling Your Business: How Long Does It Take?’, it’s evident that successful marketing of a business demands thorough planning and groundwork. In this initial phase, sellers meticulously assess their business and implement necessary adjustments to ready it for the market. Typically, this stage spans two to six months, though the exact duration hinges on the unique attributes of each business. Below are the fundamental steps that business owners should undertake during this preparatory phase.
- Assess the Business. Every potential purchaser will require an accurate description of the business. That means sellers must provide current and accurate financial statements, list all assets, and examine the market conditions. During this phase of the sale process, sellers list the company’s strengths, weaknesses, opportunities, and threats. That analysis is often referred to as SWOT. If sellers have specific questions about what should be included, a broker, attorney, and accountant will provide advice.
- Valuation of the Business. During this phase, experts estimate the business’s value. This step is crucial, as over or underpricing a business will lead to less-than-stellar results. Expert brokers will have the proper training to value your business. Look for letters such as CFA or CVA in their credentials. Again, collecting appropriate documentation will assist the evaluation process.
- Making Necessary Improvements. In many cases, the valuation is impacted when aspects of a business require improvements. For example, dated equipment may encourage potential purchases to look elsewhere for an opportunity. Work with an accountant and the broker to determine which improvements would provide an acceptable ROI.
The Marketing Phase
As we delve deeper into ‘A Timeline for Selling Your Business: How Long Does It Take?’, it becomes clear that, at this juncture, the broker takes the lead in executing marketing strategies tailored to the specific needs of the business. In this phase of the sale, the seller’s involvement in marketing activities might vary. The optimal approach is influenced by a myriad of factors, making it essential to collaborate with a broker to gauge the situation and decide on the seller’s role in the sales journey. Highlighted below are core elements present in almost every sale. Typically, this phase can span anywhere from three to twelve months.
- Creation of the Marketing Plan. The overall marketing plan will vary depending on the type and size of the business. There is no one-size-fits-all marketing plan brokers use when determining the best course of action for selling a business. However, expect a comprehensive promotional plan that includes appropriate strategies like online promotions, industry publication advertising, and networking. All parties involved in the sale should agree on the sales plan before it’s implemented.
- Maintaining Confidentiality. In many instances, sellers are not comfortable having business information freely circulated. That’s where NDAs and similar precautions come into play. The idea is to provide sensitive information to a qualified prospective buyer without that information becoming public knowledge.
- Negotiations with Prospective Purchasers. During the negotiation stage, buyers examine the information provided by the seller to determine if the investment opportunity would be workable. Not all prospective purchasers will ultimately make an offer to purchase the business, but some will. At that point, a broker’s negotiating skills are essential, as there are bound to be difficulties encountered during this stage. Buyers and sellers both have requirements, and those requirements don’t always mesh well. A broker will work with the parties or their representatives to work out issues and develop an agreement that works for everyone.
During this phase, sellers and brokers may evaluate issues that appear to hinder the sale and revise the marketing strategy to reduce or eliminate potential buyer objections.
The Closing Phase
In the ‘A Timeline for Selling Your Business: How Long Does It Take?’ framework, the closing phase is pivotal. During this period, the buyer undertakes due diligence to validate that the transaction aligns with their anticipations. The seller’s broker, attorney, and accountant collaborate closely with the buyer or their representative to address queries and swiftly resolve any potential challenges. Typically, this closing phase can extend from two to six months.
- Due Diligence. This stage allows the buyer to evaluate all aspects of the business, including its operations, potential risks, financial records, and any legal issues. The seller’s documentation must be clear, concise, and complete for the buyer to garner an understanding of the business’s status.
- Drafting Legal Documents. At this point, all documentation required to complete the sale is drafted and reviewed by both the seller’s and buyer’s legal representatives. In most instances, there will be some back-and-forth between those representatives to ensure the language used meets both the buyer’s and seller’s needs.
- The Closing. The final stage of the selling process is the actual closing. The transaction is complete at that point, and the purchaser assumes control of the business. Ideally, the closing won’t include significant problems, as the due diligence phase should have resolved any issues.
Of course, things don’t always go smoothly, which is why sellers are encouraged to be flexible and willing to make changes as the process evolves.
Other Factors Impact the Timeline
While there are average timelines that allow sellers to estimate how long selling a business will take, there are some factors that can change things. For example, market conditions change without warning as world events unfold. The pandemic is an excellent example of an event that no one could foresee that impacted the sale timelines of businesses everywhere.
Personal factors also influence how long selling a business can take. When a seller, for whatever reason, is unable to make changes, the business could take longer to sell. Here, a good example would be a seller who is unable to make substantial improvements due to a pending divorce or a serious medical condition. Brokers work with sellers to mitigate potential problems and discuss ways to alter a marketing plan if conditions change during the sales process.