24 Feb How Long Does It Take to Sell a Business? Four Factors that Influence the Timing of a Sale
Simply put, there is no one-size-fits-all answer. A confluence of factors affects when your business might sell, and it’s best to go in this process with realistic expectations. There are things outside of your control, but there are also actions that you can take before you list that will help you better the odds.
What Are the Market Conditions?
The market is dynamic and variable as demonstrated by the past few years. When the global pandemic shut down businesses in March 2020, it was presumed that business sales would come to a crawl. Instead we saw a mixed response with demand for resilient service businesses shooting up while restaurants and retail slackened. More recently, inflation and higher interest rates have introduced more uncertainty. It’s shifted from a Seller’s to a Buyer’s market, the median sold price has slipped about 3% overall from where it was last year, and banks are all over the place. Despite that, valuations remain strong, restaurants are making a comeback, and buyers continue to seek out to look for good businesses.
The specifics of your industry and your business also come into play. Ultimately, you’ll need to assess whether you can exit profitably before the next headwind shift or if you’re better off staying, modifying your business plan, and trying to grow it before you exit.
How Ready Is Your Business for Due Diligence and a Sale?
The time and effort you’ve put into getting your business ready for a sale helps determine interest from potential buyers. First and foremost is clean, consistent and verifiable financials that support the business’ cash flow and tell a dependable story. However, good financial documentation isn’t the only considerations a potential buyer will have. Have you delayed investing in equipment or upgrades that might become a hidden cost to them? How critical are you to the business’s brand and its day-to-day functioning? Understandably, a buyer wants assurances that the value of the business is transferrable, and that your key employees – to the best of your knowledge – will want to stay on under new management.
Take a good look at your exit strategy. Discuss with Sam Goldenberg & Associates how you’ll facilitate the business’s handoff and set the new owner up for success. Typically, a contract for the sale and acquisition will include several weeks of hands-on training by the seller, but what is preferable in each instance will depend on the business, its relationships, the role of the Seller, and the experience of the buyer. Expect a buyer to want to know your involvement in the company and address any potential red flags.
Effectively (and Confidentially) Marketing Your Business
Properly promoting your listing can be the difference in reaching a pool of qualified buyers, waiting for months, or having to sift through a lot of wannabe buyers. Online marketplaces are a great place to start, but the advantage of working with Sam Goldenberg & Associates is that they we have a database of pre-screened buyers who are waiting for the right opportunity as well as other successful business buyers with whom they’ve worked in the past and are on the lookout for suitable horizontal acquisitions.
The other advantage of working with a professional advisor is that we can help maintain the confidentiality of your business being for sale on the market place and relieve you from handling the nitty gritty of the negotiations. Sam Goldenberg & Associates has been steeped in New Mexico’s business community for nearly four decades, and we put those relationships to your advantage.
What is a Fair Asking Price
Last, but certainly not least, the asking price of your business can bring buyers in or push them away. Don’t let your emotional attachment to what you’ve built cloud your judgment. Working with a business broker can provide you with valuable information on what constitutes a fair sales price. Keep in mind that selling a business is not only a financial but a lifestyle decision. Working with Sam Goldenberg & Associates can also help better understand a bank’s lending process and how they go about determining how pricing meets – or doesn’t – their lending criteria. Sam Goldenberg & Associates will work with various SBA express lenders to get your business pre-qualified, but if the asking price exceeds what an SBA lender is willing to support, you have dramatically reduced your pool of potential buyers. Pricing your business within the right range will help to shorten negotiations and speed up the sale process.
Despite the average time from listing to close, these factors make a significant difference in how long it takes to sell your business. The good news is, you don’t have to go through the process alone. Get in touch with Sam Goldenberg & Associates to start on your path to a successful sale.