Similar to selling real estate, a business can be sold very quickly but it can also take months before a serious buyer comes along and makes a real offer. If you’re selling your business, you’ll most likely want to know how long to expect before your business sells.
How long it takes to sell depends on whether you sell your business privately or through a business broker. If you’re selling privately, it could potentially take longer if you are new to selling a business. There are many potential issues that can arise during the process in which brokers can usually foresee.
It also depends on factors such as the price, location, financials, industry, growth, and the issues of your business as well as much more. All these things can dissuade a potential buyer from committing to signing a contract.
Factors that affect how long it takes to sell
Different business brokers use different portals to advertise their business listings. They also have different techniques of selling and some will have larger databases of interested buyers than others. If your broker advertises on businesstrade.com.au, your listing will have access to our database of thousands of interested buyers.
The popularity of an industry depends on external factors such as consumer trends. Food businesses are quite popular due to the meteoric rise of reality television shows such as MasterChef. A lot more people dream of having a restaurant business now compared to before when it was less trendy. A business in a popular industry will have more people searching through your business and increase the likelihood of your advertisement piquing the interest of a serious buyer.
The COVID-19 pandemic may also dictate certain trends of buyers flocking to safer industries such that are focused on essential goods. Trends change and it is unfortunately out of a seller’s control.
The price will always affect the ability to sell something. The asking price that is advertised may be overpriced if there are few inquiries and may sit on the market for an extended period of time as a result.
Going back to the example of food businesses. If there are many businesses that are similar to yours, it may make it harder for your business to sell. Supply and demand economics does apply as it does with everything so being too similar to every other business for sale could mean that your business takes longer to sell.
Reason for selling
If you are selling for the wrong reasons, then it may show when the time comes for a buyer to make a decision. If your business is not profitable and you are selling it at a price which is considered overpriced, the buyer may see through the facade.
If your business is in a very specific niche that very few people know about, it may not be exposed to a large audience of potential buyers as it is not something many people would be searching for. This can work in and against your favour as someone selling a business as it may just be the business someone is looking for but it may also be the business that no one is looking for which could affect how long it takes to sell your business.
Having a bad business broker can cause delays to the time it takes for you to sell your business. They may make mistakes during the negotiation stage or turn off potential sellers due to their bad attitude.
Processes that affect how long it takes to sell
The initial step for a business broker is to understand your business and essentially what is for sale. They will write up the advertisement which provides some information but not enough to identify your specific business (the Blind Profile). They will also write up a detailed report that is given to prospective buyers after signing an NDA (the Confidential Business Review). This process may take anywhere from 1-3 weeks.
Buyers will meet with the owner and get a chance to learn and evaluate information about the business as well as discuss offers. This process occurs prior to a deal being finalised and can take anywhere between weeks to months. This depends on many factors, such as the complexity of the business and the speed of communication between the buyer and seller.
It may take 2 to 3 months to close the sale of your business after an agreement has been made between you and the buyer. The reason for this is because the buyer has to do their due diligence, organise financing, negotiate with the landlord as well as prepare documents with their lawyer.
There may be other obstacles such as third party approvals in the case where a franchise is being sold by a franchisee. The franchisor will have their say in approving the buyer. There may also be a requirement to deal with local councils or other government organisations when the buyer needs to get approval for a license or permit.
These processes all depend on the speed of others and in the event there is a delay with one approval, the entire process takes longer.
What is the average time it takes for a business to sell?
It is well known within the business broker industry that it takes on average 6 to 9 months to sell a business. This is why business listings on Business Trade last for 9 months to cover the average duration for a business to sell. All the factors stated earlier affect this process and there are things which the buyer, seller and business broker can all do to speed it all up. If you intend to sell your business, consider all the factors and processes that may affect the time it takes for you to sell your business.
In any case, you should prepare in advance if you intend to sell your business and some experts say you should prepare two years in advance in order to get the best price.