It’s one of the first questions an owner will ask: how long will it take to sell my business? I have a standard answer, which is six to seven months, but it could be longer.
Here are some ways to help your business sell faster.
Size. Bigger businesses are easier to sell. Operations with less than $2 million in sales generally have a hands-on owner who is deeply involved in the day-to-day business; they often are essential to sales and service, employing just a few technicians and installers. Even if the company is profitable, acquiring a small operation feels like buying a job rather than a business. For the most part, strategic buyers will consider small companies only if they already own a related business and can achieve economies of scale.
Staff. This is related to size; larger companies will have more staff and well-defined roles for employees. The owner will be less essential to the day-to-day operations, since there will be sales, administrative, and field staff to handle the work. Buyers prefer companies that have several layers of management, so they understand who can take charge and help ease the transition when the current owner leaves.
Family members, if they’re part of the business, will have defined roles and salaries that are reasonable for the current labor market. Generally, buyers hope that family members are also replaceable, since they seldom stay long under new ownership.
Diversity of offerings, with room to grow. A company that has provided excellent service, repair, and replacement to its customer base over the years provides a lot of value for a new owner. Buyers look for opportunities to increase offerings to this loyal customer base: maintenance agreements, longer service hours, or faster response times. These quick wins can help grow the business and increase profitability over the first years. That’s important to a buyer who will be facing double-digit interest rates – for the first time since 2007. Federal Reserve policy has raised the prime rate several times this year, causing interest rates on business loans to double in less than 12 months.
There are also things an owner can do to help the deal move faster once we find a qualified buyer. Making sure that your financial records are in order and that all personal expenses and family perks are cleared off the books. Getting organized so you can access tax returns, leases, and contracts quickly during the diligence process. Being responsive to inquiries and requests for documentation; many deals are drawn out much longer than they have to be because one party or another is slow to produce information for the buyer, lender, or other professionals during the process.
Hiring an experienced broker can make the deal move more quickly and help an owner avoid costly pitfalls. Your broker will spend many hours screening buyers so you don’t have to waste time dealing with prospects who aren’t a good fit or won’t be able to secure financing. They will help you prepare for the diligence process and keep communication flowing between the two parties. An experienced broker will also have a network of professionals who know how to get deals done: lenders who understand the industry and your business model, attorneys who have experience with this kind of business transaction. They will all contribute to a faster and smoother closing.
Lastly, I always recommend that you choose a broker who only gets paid when the sale closes. That means they’re taking on all the risk until the deal gets done; they have the same motivation to find the right buyer and make sure the sale closes quickly.
If you are interest in selling your business, the first step is to get an opinion of value.