One of the chief questions that we hear asked by sellers is "How long to sell my business?" In fact, next to valuation, it is probably the number one question that we hear buyers asking.  The truth of the matter is that there is a wide range of time, and there are a number of items that impact the timing. 

Price is the Number One Factor for How Long to Sell a Business

Much like selling a house, if you want it to move you have to be smart in pricing it.  In fact, one of the key points raised in any valuation is that the valuator assumes that "the buyer has other comparable options" regarding businesses to buy.   Your business is surely unique, but how unique is it to a buyer?  In all likelihood a buyer, given a reasonable amount of time, can find a business suitably similar to buy at a reasonable price.

So what does this mean?  The seller needs to price well in order to sell in a reasonable amount of time. Clear Rock recommends going to market with a price that is within 10-15% of a likely sale price.  This gives you room for negotiating, but still leaves you feeling credible regarding the price. 

Well Documented Businesses Sell Quicker

Consider this: in most small business sales, the "book value" of the business is typically only a fraction of the asking price.  That is to say that if you were to just close the doors and sell your equipment, inventory, etc., the price would be a fraction of the price you would want to sell your business for.  

For this reason, a well documented business that is supported by tax returns will leave a buyer feeling much more comfortable.  The transaction implies far less risk for the buyer, the banker, or any other investors.  This makes the sale move along that much faster.

Willingness to Hold a Loan Accelerates the Sale Process

The vast majority of small business sales contain some portion of owner financing.  (See our articles on Owner Financing for more information regarding the rationale, etc).    The willingness of an owner to finance a meaningful portion of the transaction price (i.e. greater than 25%) has a direct bearing on how long it takes to sell a business. 

Financial Trends

Is your business performing better or worse over the last three years?  If the answer is better, that bodes well for the length of time for a sale.  But if your revenues have been trending downward the implication is that there is something structurally wrong with the business or the industry.  No matter if that is true or not, you can expect any buyer to be more cautious and thorough in their due diligence process.

Conclusions 

There are many other issues that can impact your length of time the business is on the market. These are some of the major ones, but each business and situation is different.  Your Clear Rock professional can work with you to identify and address these issues as you get ready for your own sale.

One person has commented on this article.

No.1  Well Said

As a buyer, beyond clean financials, the first thing I always look for is a seller's willingness to extend a loan... for all the usual reasons.

Jason (Unregistered) • 2007-05-04 08:15:07

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