Timing Expectations 

You’ve gone through the rigorous process of deciding to sell your business, and you’ve decided that now is the time. You may wonder, how long will it take? For all transactions since 2000, the average time on the market is 200 days or about 7.3 months. But the average time to sell a business has increased over the years, from six months in the early 2000s to ten months in recent years. That timing, however, depends on several variables.

Variables 

There are three primary variables that affect how long it takes to sell a business:

1. Your Industry
2. How Attractive Your Business Is
3. Your Marketing Strategy

Let’s take a closer look at each.

Variable 1: Industry 

All investor’s perspectives can be boiled down to two things – risk and return. The greater the returns your business offers, the more your business will be sought after. The reverse can be said for risk – the riskier your business, the fewer buyers you’ll have courting you and your business. This is precisely why certain industries are more desirable than others – because they offer the potential for outsized returns or they represent less risk for the investor. 

As a result, a strong correlation exists between the industry type and the number of days a business is on the market. Manufacturing and technology businesses tend to attract more buyers and therefore sell faster than many retail and most service-based businesses. On the other hand, many retail businesses don’t have the potential to generate significant returns, or they may be excessively risky, which is why most investors shy away from the retail sector. If your business is in an attractive industry, such as technology or manufacturing, it will likely sell sooner due to the higher demand than if it’s in a low-growth or unattractive industry. If you operate in a competitive or otherwise risky industry that offers limited returns, expect the sale to take longer than average.

Variable 2: Attractiveness

Highly attractive, and therefore sought after businesses, possess many of the following attributes:

• Improving financial trends, such as increased revenues or margins
• Low capital expenditures, inventory, or working capital requirements
• Desirable industry
• Strong industry growth, or stability
• Low risk industry – limited competition, recession-resistant, etc.
• Scalable business
• High barriers to entry
• Weak competition 
• Strong competitive differentiation 
• Strong brand awareness
• Strong history
• Strong customer loyalty or repeat business
• Minimal customer concentration
• Strong customer contracts
• Recurring revenue
• Strong management team
• Strong infrastructure
• Valuable intellectual property
• Minimal owner dependency
• Minimal dependency on key employees
• Long employee tenure

Variable 3: Your Marketing Strategy

Perhaps Sun Tzu was really contemplating M&A strategy when he said, “tactics without strategy is the noise before defeat.” As in war, so goes business. Marketing your business for sale using a strategic marketing plan through the right investment banking firm should help you sell your business faster. Find the best M&A advisor possible and give them everything they need to help you. Doing so will dramatically speed up the process.

Timeline for Selling a Business

Following is a brief description of the steps involved in selling a business and the time frames involved for each step.

• Preparing Your Business for Sale (1 to 2 Months): Preparing your business for sale includes normalizing your financial statements, valuing your business, and creating an information memorandum, teaser profile, and other key documents. Preparation is typically a controlled and predictable step and usually takes one to two months. 
• Marketing and Negotiating an LOI (1 to 9+ Months): It can take 1 to 9 months to locate a buyer, and generally one to two months to negotiate a letter of intent (LOI) once you identify the buyer. This time period is often frustrating for a seller because you may feel as if nothing is happening. But it’s important to keep your focus on your business and maintain consistent revenues while it’s confidentially being marketed for sale.
• Due Diligence and Closing (2 to 3 Months): Conducting due diligence usually takes four to eight weeks, although it can sometimes take longer depending on who the buyer is and how organized you are as the seller. Due diligence can be delayed for many reasons, such as delays in obtaining financing or as the result of inaccurate financial information. Negotiating and closing the transaction usually takes from one to two months once due diligence has been completed. In some cases, it can take several months to close the transaction due to third-party delays from attorneys, accountants, banks, or license-transfer approvals. 

These guidelines are rough estimates only, and you should be fully prepared for the transaction to take significantly longer. Most of the factors that increase the value of a business will also have an impact on the amount of time it takes to sell the business. If you want to increase the value of your business or speed up the time frame, the steps you must take are often the same.

Key Points

When planning to sell a business, attempt to maintain a balanced viewpoint. The actual time period can vary from one day to more than three years. Selling a business is a stressful, emotional event, and it involves anticipating other peoples’ actions, which are beyond your control. As a result, the data is varied, and accurately estimating the time is difficult.