Patience may be virtuous, but when I first meet potential clients, one question is inevitably top of mind: How long will it take me to sell my company? At the risk of sounding like a lawyer, the answer is “it depends”. I realize this answer is about as satisfying as a warm blanket on a tropical beach, but just like snowflakes, every business is different.
I can say with conviction that it generally takes 2-3 months to close a small business sale after the acceptance of a formal offer. But how long does it take to get to an acceptable offer once you put your business on sale? 167.5 days. No, I’m kidding. It really does depend, and my crystal ball is no better than the one they use over at Pratt’s Stat. So I checked their historical, aggregated data for median days to sell a business:
*-Pratt’s Stat data
This data reflects transactions of all sizes, but it still gives a good sense of the timeline involved, and should help to set a business owner’s expectations. Selling a business is not an overnight affair; it is a process. And like most things in life worth having, it requires time and patience. As you can see from the orange trend line above, since 2015, in particular, it requires significantly more time and patience. But the data above reflects only the median days to sell. What determines whether your business will take longer than the median, or sell faster than the median? Besides hiring a competent and experienced business broker to help you, there are a number of factors that affect your business’s particular timeline.
The first set of factors is those over which neither you nor your broker have any control: the general state of the global, national, state and local economies, inflation, interest rates, migration flows into or out of your state, whether your industry is in a downturn or growing, etc. The more important set of factors, however, is the set that you or your broker can control. For example, without regard to the market or industry generally, are your company’s revenues and profits growing, flat or declining? Generally speaking, as your business grows or declines, so does potential buyers’ interest in it. Like a well-paying job, growing companies are well received by nearly everyone. Flat companies can also be compelling to the right kind of buyer, particularly one who is familiar with your industry and sees a way to jumpstart your business. But like tax hikes, or an evening with the boys on Valentine’s day, declining companies tend to be a tough sell. Turnaround experts and opportunists exist, but they are few and far between, and like savvy shoppers everywhere, they will demand a discount.
Regardless of your business’s trajectory, however, an incredibly important factor is whether your business is priced correctly. On the one hand, you want to maximize your proceeds, but on the other hand, you want to actually sell. A business priced too low can leave money on the table, but a business that never sells is worth $0, regardless of its list price. Business listing databases are littered with overpriced companies that will never sell.
But assume your business is desirable and your price is right. How do you ensure an efficient sale process? The best general rule is “Do it once, do it right.” Whether you are polishing up a gem of a business or putting lipstick on a pig, a potential buyer’s first impression is important, and you only get one chance to make it. That means you need to be prepared to market your business, not to customers, but to a potential owner.
Ask yourself what a prudent buyer needs to know to understand your business and its economics, and then make sure you have all of those things handy and organized. The next tech startup unicorn may very well get started in a college dorm room, but unless you’re running the next Facebook, potential buyers are going to want to see your financial information, your tax returns, your business plan, and your highly polished marketing materials. They are also going to want to understand how you can transfer your business to them seamlessly, so that they capture fully the value of what they’re buying. These are things with which an experienced and competent business broker can help you.
Last but not least, don’t forget the effect of government. Whether it is a licensing approval or a sales tax clearance, some government agency is likely to play an outsized role in your business sale drama. It pays to be prepared (and patient), because the only thing slower than a government approval is the sale of a business that didn’t anticipate the need for one.
Comer Business Brokers is a full-service business brokerage firm located in Fairfield County and serving the entire state of Connecticut and Westchester county, NY. Owner and founder Irina Comer has more than a decade of experience with mergers and acquisitions of all types. She spent ten years at PricewaterhouseCoopers advising local, national and international companies on transactional issues, including valuation, diligence, structuring and positioning. After obtaining her MBA from New York University’s Stern School of Business, Irina worked in the Mergers and Acquisitions division of Bank of America Merrill Lynch. Comer Business Brokers can help you to structure a deal that makes sense and close efficiently and with confidence, all while maintaining the strictest confidentiality of your personal and commercial information. We hope that this adds to your understanding of the process, and we look forward to hearing from you when you decide to take the plunge. Best of luck!