How Long Will It Take to Sell a Business?

How Long Will It Take to Sell a Business?

Since 2007, the amount of time it takes to sell a business has increased. This has occurred despite technological advancements and the ability to more effectively reach more potential buyers and communicate effectively. According to the International Business Brokers Association (IBBA), the average time to sell a business is 6.2 months. However, the timeframe of your sale depends on many factors, such as your industry and the size of your company. 

 

Many of the frustrations business owners face when they sell their company are related to unrealistic expectations. The more information you have before the sale begins, the better you can prepare. In this review, we take a close look at how long it takes to sell a business. We also focus on the timeframe for each stage of the sales process. Keep in mind, however, that the sales timeline may be different for every seller, depending on the specifics of the company, industry, and seller.  

What is The Typical Sales Time Frame for Businesses?

It takes between 7 and 11 months to sell a business in most cases. A small business in a high-demand industry that has organized bookkeeping and strong financial records may sell in a short amount of time, whereas a large company in an industry with less demand may take longer. Of course, there are many additional factors that can affect how long it takes to sell a business. 

What Major Steps Are Involved In The Business Sale Process?

It helps to break the sales time frame down into steps to better understand how long the process may take. Notably, selling a business can be broken down into five major steps — preparation, marketing, negotiation, due diligence, and closing. Below is a closer review of each step with an estimated time frame for each. 

Preparation (1-2 Months)

Although it may be tempting to jump directly into the marketing stage in an effort to sell as fast as possible, we strongly recommend taking time beforehand to properly plan the sale. This will save you a great amount of time long-term and help avoid setbacks and disruptions during the sale process. Specifically, the preparation stage should include these steps: 

 

  • Professional valuation
  • Exit strategy planning
  • Collect documents
  • Non-disclosure agreement (NDA)
  • Confidential information memorandum(CIM)
  • Create your listing

Marketing (2-3 Months)

There are different marketing techniques your business broker may employ to find a qualified buyer for your business who is willing to pay fair market value or greater for your company, not the least of which is website listings; this may be done in a confidential manner or via a public listing. Your broker may also leverage their personal contacts, connections, networks, and databases to find qualified buyers and present them with your sales memorandum. This stage also involves screening offers. Overall, this process usually takes between two and three months. 

Negotiation (1-2 Months)

The negotiation stage involves discussions with potential buyers about the terms of the purchase and the purchase price. Both sides will also discuss how the buyer will pay for the company (seller financing, SBA loan, etc.). The timeframe for negotiations varies and depends on response times. Some negotiations only take a few days, whereas in other cases it can take more than two months. Once the seller chooses a buyer, the buyer will sign a letter of intent (LOI). 

Due Diligence (1-2 Months)

Due diligence offers the buyer an opportunity to review your company a final time before they close the sale. They may request documents from the seller, a walk-through of the company’s facility and daily operations, and meetings with the seller (and other members of the company who have been notified of an imminent sale. 

 

The time frame for due diligence depends on how well-organized the seller is and how fast and on track the buyer remains throughout the process. The business broker should also guide the process to help avoid setbacks or prolonged periods of time where nothing is accomplished. On average, the due diligence stage takes between one and two months. 

Closing (1-3 Months)

There are various tasks that must be completed in order to complete the sale. Notably, this includes drafting the purchase agreement; your business broker and/or attorney may use the letter of intent to do so. Both parties will also need to determine a time to close the sale. Importantly, it may also take time for the buyer to receive the financing they need to complete the purchase. For instance, if they are receiving an SBA loan, then this can take up to 90 days. 

 

Keep in mind, this does not include the time it takes to train the buyer after they complete the purchase. The training period can last for up to a year. Of course, the specific time frame of training depends on what was negotiated and included in the purchase agreement. Insomecaes, no training is required, particularly if the buyer already understands the inner workings of the company and there is an existing workforce that can take over the previous owner’s role.

What Factors Influence The Sales Timeline?

The truth is every sale is unique, and the specific timeline you can expect depends on your business and situation. There are a range of factors that you should consider when assessing how long it may take to sell your business. Notably, the factors that may influence the sales timeline include (but are not limited to):

 

  • Industry and business type
  • Buyer type
  • Purchase price
  • Business broker
  • Response times
  • Organization and bookkeeping
  • Location

 

As a general rule, the higher the sale price the longer the business sale takes. This is because the more the business costs the fewer buyers there are. Also, negotiations and due diligence may take longer for businesses that sell for more than $1 million as buyers are more cautious. 

 

Of course, there is more demand for some business types and industries than there are for others. The response time and level of involvement of your business broker (and the buyer) also play a key factor. Lastly, organized bookkeeping may factor into how long it takes to sell your business as well. 

Effective Strategies to Shorten How Long It Takes to Sell Your Business

Although there are many elements outside of your control, there are many that you can control. Moreover, there are effective strategies that you can implement to help shorten the sale time frame and avoid costly and time-consuming setbacks. Notably, these strategies include:

 

  • Receive a professional business valuation from a qualified and experienced business broker in your area
  • Understand your financial information and performance and how that impacts your sale
  • Ensure you implement an organized and goal-oriented due diligence process
  • Ensure you are prepared and able to provide an organized closing experience with effective communication

Business Valuation

Your valuation is one of the most influential factors when it comes to how long it takes to sell. If you do not understand your value on the market and are consequently unable to justify your asking price, then you may experience much longer times to sell, if you are even able to sell at all at your current asking price. Also, a valuation helps you justify what you are asking with reliable data for your company and industry overall. This helps you sell faster without lowering your price to do so. 

Understandable financials

The fact is companies that are profitable and can prove their steady income and profits sell much faster (and easier) than companies that are unable to provide sound bookkeeping and proof of financial performance. 

 

It is your job as the seller to present your company in an organized fashion; potential buyers do not want to search through a box full of receipts and bank statements to determine your company’s financial performance. Therefore, if you have taken the time to organize your bookkeeping and can present your company in a verifiable and organized fashion, then you are likely to shorten the time to sell in a significant manner. 

Organized and goal-oriented due diligence

Due diligence is the buyer’s time to ensure they are comfortable moving forward with the purchase. However, this should not be entirely open-ended to the point where the buyer takes months to complete the process. Instead, there should be a clearly defined structure for due diligence, which is usually led by the seller’s business broker. 

 

Specifically, the implementation of a due diligence deal map, which highlights the steps involved with the due diligence process and serves similarly to a checklist, is a great way to stay on track and avoid setbacks and canceled deals once you reach the due diligence stage following a signed letter of intent (LOI). 

Organized closing and communication

Lenders, attorneys, accountants, and buyers are all involved with the due diligence and closing stages. As you might imagine, poor communication between all involved parties often leads to setbacks and makes it take longer for the sale to finish. 

 

All parties should have access to content so that no party can significantly hinder or delay the process. The seller, and in particular, their business broker, can help ensure an organized closing and effective communication between the M&A attorney(s), seller, buyer, buyer’s broker, certified public accountants (CPAs), lenders, and escrow agents (along with others involved with the sale). 

Final Thoughts

Ideally, you should give yourself a year or more to sell your company. This helps avoid rushing any decisions or processes and ultimately selling for below what your company is worth. However, with patience and understanding of the process, you can enjoy a smooth, efficient, and ultimately successful sales experience. 

Sigma Mergers & Acquisitions is the leading Mergers and Acquisitions, Business broker advisory firm in Dallas Texas specializing in facilitating strategic transactions for businesses across diverse industries. Our seasoned team of experts meticulously navigates clients through the intricate process of Business brokerage, mergers, acquisitions, and divestitures, ensuring seamless transitions and maximizing value. With a client-centric approach, we offer tailored solutions designed to meet the unique needs and objectives of each organization. Our comprehensive suite of services encompasses every aspect of the transaction lifecycle, from initial valuation and market analysis to due diligence, negotiation, and post-merger integration. Through a combination of extensive industry experience, market insights, and unparalleled dedication, Sigma Mergers & Acquisitions delivers exceptional results that drive growth and prosperity for our clients. Whether you are considering selling your business, seeking strategic acquisitions, or exploring other growth opportunities, trust Sigma Mergers & Acquisitions to be your trusted partner every step of the way. Contact us today to discover how we can help you unlock the full potential of your business and achieve your strategic objectives.

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Scot Cockroft Business Broker
Hi, I’m Scot Cockroft.

When I founded Sigma Mergers and Acquisitions back in 2003, I had sold my business the year prior.

Now, that can sound good, but let me tell you, back in 2003, it was not easy to sell a business. Not that I’m saying in modern day times it’s easy to sell a business, but back then I interviewed broker after broker after broker, and no one was interested in actually seeing the value that my business brought to the table.

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Sigma is a the leading business broker in with Corporate offices in Dallas/Fort Worth with roots from 1984. Over 600 businesses sold in Dallas, Fort Worth, Texas, Oklahoma and across the South. Sigma provides full business brokerage services with NO upfront fees. We provide Market approach business valuations for business sales. Sigma is passionate about helping business owners achieve their goal of financial security. Contact us today for a free no obligation business valuation. We are here to help you achieve your goals.

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