How Long Does the Sale of a Business Take? 7 Key Variables

As a Business Broker I am asked this question in every listing presentation. Unfortunately there is no general answer. The time it takes to sell a business depends on so many variables:

  1. The price is right. Business buyers are looking for profitable businesses that are priced reasonably. A highly priced business will take a lot more time to sell and will sell generally for a lower price (not higher) than if it was priced right from the first time.
  2. The general state of the economy: in prosperous times, buyers’ sentiment is positive and risk taking appetite is big. Businesses generally sell is much shorter times. An average time of 6 months is generally sufficient.
  3. The seller’s emotional readiness: Sellers’ Remorse is one of the biggest deal killers in Canada. An unready seller that puts his/her business for sale in the market has a very hard time making a decision about an offer. They generally end-up frustrating the buyer, loosing the offer and even losing credibility in the marketplace. The seller would need the help of a very experienced business broker to get serious buyers back on the negotiating table and close a new deal in a reasonable time. This might take years.
  4. Luck: sometimes the first potential buyer ends up being the right one. The business can sell in only a few weeks. The seller needs however to be alert and recognize that a reasonable offer from a first buyer could be a great opportunity that should not be missed. A large number of sellers interpret a quick offer from a first buyer as an indication that the business is low priced. This cannot be further from the truth, especially if the business has been professionally priced.
  5. The business is “sexy”: some industries are simply more attractive to buyers.  This does not mean that they represent better opportunities. It simply means that they are trendy. For example, Import and distribution businesses are in big demand at this time and generally sell for higher multiples and in shorter time periods.
  6. The seller is very honest with the broker and/or buyers about the good the bad and the ugly of his/her business. Brokers collect information from sellers and present them to potential buyers. When information is unclear or misleading, brokers loose faith in the seller and the business. Brokers will then take more time to understand the intricacies of the business and find the right buyer for it. On the other side, buyers ask many questions about the business. Most buyers will back off if information is conflicting.
  7. Betting on the wrong buyer. Some sellers are so desperate to sell their businesses that they accept offers from non qualified buyers knowing in advance that these buyers will fail if they buy the business. This is a big mistake as these buyers at one time or another will discover that the business is not for them. All the time spent with these buyers is scarified, The business has been out of the market during that time. Worse, new buyers start wondering if there is anything wrong with the business. Why didn’t that buyer buy it?

These are some of the reasons that will influence the time it will take to sell a business. In the current state of the economy, it generally takes the average business seller between 6 months and 2 years to find the right buyer. Good Luck!

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