How Long Does it Take to Sell a Business?

How long will it take to sell my business? That’s one of the most frequently asked questions we receive.

And, hey, we get it. Once you decide to put your blood, sweat, and tears on full display, patience suddenly comes at a premium. But this is one of many critical questions you should consider when planning to sell your business, and many factors can affect the time frame.

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 more recently. Selling a business has become more difficult and takes longer than it did ten years ago. That’s because the internet has given buyers more options and they have become more selective as a result.

This article answers the following questions:

• How long does it take to sell a business?
• Is there a best time to sell a business?

We also explore the following six variables that can affect how long it will take to sell your business:

• The selling price
• The asking price
• The multiple of SDE or EBITDA
• The region your business is located in
• Financing available for your business
• The industry your business operates in

We also examine the factors that are affecting how long it takes to sell a business in recent times, such as economic conditions and technology. Finally, we offer you specific advice on what you can do to help ensure your business sells as quickly as possible. So, what are you waiting for? Start reading. Now!

Table of Contents

• Statistics on How Long It Takes to Sell a Business
• 6 Variables that Can Affect How Long it Takes to Sell a Business
  • Variable #1: The Selling Price
  • Variable #2: The Asking Price
  • Variable #3: Multiple of SDE or EBITDA
  • Variable #4: The Region
  • Variable #5: Financing and Down Payment
  • Variable #6: The Industry
  • Summary of the 6 Variables
• Sources of Data and Their Accuracy
  • Industry Surveys
  • How Accurate are the Statistics?
  • Other Sources of Statistics
• General Factors That Affect How Long it Takes to Sell a Business
• Specific Factors That Affect How Long it Takes to Sell a Business
• A Timeline for Selling a Business
• Steps to Sell Your Business Faster
• Summary

Statistics on How Long It Takes to Sell a Business

BIZCOPMS is a database of business-for-sale transactions in the United States, including the length of time the business was on the market. BIZCOMPS contains over 13,000 transactions dating back to 1996. Most of the transactions in BIZCOMPS are smaller businesses priced at less than $1 million. Additionally, almost all of the transactions were completed with the assistance of professional advisors, primarily business brokers.

For all transactions since 2000, the average time on the market was 200 days (approximately 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. Without a doubt, selling a business has become more difficult and takes longer than it did ten years ago. The reasons are explained below.

6 Variables that Can Affect How Long Does it Take to Sell a Business

Variable #1: The Selling Price

Below are statistics on the average time it takes to sell a business broken down by sales price (not asking price):

• Less than $100,000: 199 days (6.3 months)
• $100,000-$500,000: 218 days (7.2 months)
• $500,000-$1,000,000: 243 days (8.1 months)
• $1,000,000-$5,000,000: 291 days (9.7 months)
• $5,000,000-$10,000,000: 329 days (10 months)

Conclusion: Larger businesses take longer to sell. Based on our experience at Morgan & Westfield, smaller businesses have, indeed, sold more quickly in the past, but we believe that trend is reversing.

Variable #2: The Asking Price

The following statistics show the average time it takes to sell a business based on the difference between the asking price and selling price:

• 0%: 203 days (“0%” means the business sold for the full asking price) (6.7 months)
• 1%-5%: 214 days (7.1 months)
• 6%-10%: 213 days (7.1 months)
• 11%-20%: 221 days (7.3 months)
• 21-30%: 226 days (7.5 months)
• 31%-40%: 225 days (7.5 months)
• 41%-50%: 242 days (8 months)
• 51%-75%: 240 days (8 months)
• 76%-100%: 285 days (9.5 months)

Conclusion: The more reasonable the initial asking price, the faster the business should sell. Businesses priced at more than 76% of the ultimate selling price take 40% longer to sell than businesses that sell at the asking price.

Variable #3: Multiple of SDE or EBITDA

This variable considers how reasonably priced the business is. For example, a business with an SDE (Seller’s Discretionary Earnings) of $1,000,000 that ultimately sells for $3,000,000 has a multiple of 3.0.

This data can be misleading, as a direct correlation between the multiple at which a business is sold and the attractiveness of the business may not exist. However, an indirect correlation may exist.

For example, businesses sold at less than a one multiple may be highly unattractive and may take longer to sell, while businesses sold at a high multiple may represent more attractive businesses, such as manufacturing or technology companies.

Multiples may also be highly skewed for lower-priced businesses. For example, a business with an SDE of only $20,000 that sells for $80,000 can distort the data. Also, bear in mind that these data only consider the selling price and do not consider the initial asking price. Despite these challenges, we chose to analyze the data to examine the correlation, whether it be direct or indirect:

• Less than 1.0 Multiple: 207 days (6.9 months)
• 1.0–2.0 Multiple: 210 days (7 months)
• 2.0–3.0 Multiple: 226 days (7.5 months)
• 3.0–4.0 Multiple: 236 days (7.8 months)
• 4.0–5.0 Multiple: 232 days (7.7 months)
• 5.0–10.0 Multiple: 256 days (8.5 months)

Conclusion: The correlation between the multiple and number of days on the market is slight. We do not know if this correlation is direct or indirect.

Variable #4: The Region

The following statistics show the average number of days a business was on the market, broken down by region:

• Canada: 245 days (8.1 months)
• Midwest: 240 days (8 months)
• South: 219 days (7.3 months)
• Northeast: 217 days (7.2 months)
• West: 215 days (7.1 months)

Conclusion: Businesses for sale in desirable, high-population growth areas tend to sell faster. For instance, it’s easier to sell a business in Orange County, California (19% faster, 211 days) than it is to sell a business in Iowa (252 days). Many looking to buy a business will consider relocating. In fact, a substantial portion of businesses sold in the Southwest and Southeast are sold to people moving to the area. The fact that people are willing to relocate opens up the number of potential buyers looking to buy your business, which effectively speeds up the selling process. More buyers mean that the business will be easier to sell and will often sell faster.

Variable #5: Financing and Down Payment

Below are statistics for the average number of days a business is on the market, broken down by the amount of down payment. It is a long-held belief by virtually all business and M&A brokers that a business is easier to sell when the owner is willing to finance a portion of the sale. These statistics also include transactions in which bank financing was involved. Most deals in the BIZCOMPS database with less than a 20%-30% down payment likely involved some form of bank financing, which can cause statistical errors, as deals involving bank financing take an extra 30 to 90 days to close. Also, all-cash deals are generally quicker to close and often represent lower-priced businesses in which due diligence is expedited.

• 0-10% down payment: 215 days (7.1 months)
• 11%-20% down payment: 241 days (8 months)
• 21%-30% down payment: 255 days (8.5 months)
• 31%-40% down payment: 221 days (7.3 months)
• 41%-50% down payment: 209 days (6.9 months)
• 51%-60% down payment: 195 days (6.5 months)
• 61%-70% down payment: 216 days (7.2 months)
• 71%-80% down payment: 230 days (7.6 months)
• 81%-90% down payment: 237 days (7.9 months)
• 91%-99% down payment: 240 days (8 months)
• 100% down payment: 215 days (all cash, no financing) (7.1 months)

Conclusion: The more financing the seller offers, the quicker the business should sell. We believe most deals in the database with less than a 30% down payment involved bank financing, which lengthened the amount of time to close the transaction.

Variable #6: The Industry

The following statistics show the average number of days a business is on the market, broken down by industry type:

• Communication (SIC Code 48): 193 days (6.4 months)
• Transportation (SIC Code 40-47): 206 days (6.8 months)
• Retail (SIC Code 52-59): 211 days (7 months)
• Services (SIC Code 70-89): 214 days (7.1 months)
• Insurance, Finance and Real Estate (SIC Code 60-67): 216 days (7.2 months)
• Manufacturing (SIC Code 20-39): 244 days (8.1 months)
• Wholesale (SIC Code 50-51): 243 days (8.1 months)
• Electric, Gas and Sanitary Services (SIC Code 49): 247 days (8.2 months)
• Construction (SIC Code 15-17): 270 days (9 months)

Conclusion: A correlation exists between the industry type and the number of days a business is on the market. However, much of this data seems to defy conventional wisdom. Most brokers believe construction-related businesses are difficult to sell, and the data supports this long-held belief. However, most business brokers believe manufacturing-related businesses are easier to sell, and the data does not support this belief.

Summary of the 6 Variables that Can Affect How Long it Takes to Sell a Business

Below is a chart of the estimated top variables that affect the length of time it takes to sell a business:

Sources of Data on How Long it Takes to Sell a Business and Their Accuracy

Industry Surveys

Business Brokerage Press produces an annual survey of its members. The members primarily consist of full-time business brokers. Out of a few thousand members, a large majority complete the survey on an annual basis. Non-members are also permitted to participate in the survey. The survey is mainly aimed at business brokers but a number of middle-market intermediaries and other advisors also participate.

The survey consists of several dozen questions, of which one question is usually, “How many months is the average period between listing and sale?” Recent results from surveys have ranged from six to 11 months, with the time period slowly increasing over the years. This data seems to coincide with the data from BIZCOMPS.

How Accurate are the Statistics?

The business of selling businesses is a highly inefficient one with limited resources, especially for those selling smaller businesses. Almost no surveys are validated, and most producers of surveys lure participants in with free results if they complete the survey. This type of incentive can result in inaccurate data.

For instance, when advertising a business for sale, we use a number of web portals in which we are virtually forced to provide transactional data. Our dealmakers operate separately from our back-end administrative team. Unfortunately, our back-end administrative team is not privy to transactional details; however, they are required to enter the data. As a result, they enter inaccurate data. In other words, when given the results of these surveys, we are compensated with transaction data that we already know is inaccurate so we have little incentive to input accurate data. Many other brokers are simply too busy to bother inputting data into databases.

While the data is still useful because it is sometimes accurate, one should remember that it is not without flaws. The data should be used as a guide and supplemented with good old common sense and professional advice.

Other Sources of Statistics

Another useful transactional database, the IBA Market Database, includes over 37,000 transactions. However, the database does not provide details on how long a business takes to sell. Unfortunately, we know of no other useful sources of information regarding the time it takes to sell a business.

General Factors That Affect How Long it Takes to Sell a Business

Below is a list of general factors that affect how long it takes to sell a business. These factors change over the years. However, we believe the following factors have had the most significant impact on increasing the time it has taken to sell a business in the previous 10 years.

• Internet: The internet has provided buyers of all goods and services with more options. Before the internet was popular, most businesses were sold through newspapers. This type of selling created a highly inefficient market, and it was more difficult for a buyer to compare options. Ironically, businesses were easier to sell and often sold quicker, probably due to a lack of qualified alternatives and businesses for sale.
• Information: The internet has also provided a wealth of information on buying or selling a business. As a result, today’s buyer is more educated and is often considering more options.
• More businesses for sale: In recent years, the number of businesses for sale has steadily increased. This increase has resulted in a larger number of options for buyers and depressed prices with the possibility of a protracted sale.
• Economic factors: Economic factors always affect the rate at which small businesses sell. Many economic factors can affect small-business sales such as unemployment and interest rates. As more people leave the workforce, more buyers are theoretically available to purchase businesses. Many believe a correlation exists between the unemployment rate and small business sales.

Specific Factors That Affect How Long it Takes to Sell a Business

The following is a list of specific factors that may affect how long it takes to sell your business:

• Asking Price: The more reasonable your asking price, the quicker your business will likely sell. If you own a business valued at less than $5 million, it will probably take longer to sell than a business valued at more than $5 million. Ironically, larger businesses are easier to sell due to higher demand from professional buyers. Almost all larger businesses are purchased by financial or corporate buyers as an alternative to organic growth, and the demand for a quality lower middle-market business is high. The time frame also depends on if the sale process is a negotiated process or an auction.
• Geographic Area: If your business is for sale in a high-growth area, it will likely sell faster.
• Financing: Offering reasonable seller financing terms should result in a quicker sale.
• Industry: If your business is in an attractive industry such as technology, it likely will sell sooner than if it is in a low-growth industry.
• Marketing: Aggressively marketing your business for sale through the appropriate channels should help you sell your business faster.
• Financial Trends: If your business is experiencing positive financial trends, such as increased revenues or margins, your business will be easier to sell.
• Skills Required: If your business requires highly specific skills or licensing, such as a professional or healthcare practice, your business may take longer to sell.

A Timeline for Selling a Business

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

How long does it take to prepare a business for sale?

Preparation includes valuing the business, preparing a CIM, and creating other key documents. Preparation is often a controlled and predictable step. However, the time it takes may vary from one to eight weeks. Often, the biggest bottleneck at this stage is receiving updated financials.

How long does it take to find a buyer?

This step involves marketing the business for sale and meeting with buyers. How long this period will take is often unknown, and it requires little active effort from the seller other than meeting with prospective buyers. This time period is often frustrating for the seller because they may feel as if nothing is happening. However, it is important that sellers keep their focus on the business and maintain consistent revenues or growth.

How long does a business closing take?

Negotiating and closing a deal takes from one to four months. However, several factors during this stage of the process are unknown. Due diligence can be delayed for many reasons, such as delays with obtaining bank financing or as the result of inaccurate financial information. Finally, it can take several months to close the deal due to third-party delays from attorneys, accountants, franchisors, banks, or license-transfer approvals. On average, it takes about one month to negotiate an offer with a buyer, one month to complete due diligence, and one month to close the transactions. These guidelines are rough estimates only, and you should be fully prepared for the transaction to take significantly longer.

Steps to Sell Your Business Faster

Below is a list of specific actions you can take to ensure your business sells as fast as possible:

• Valuation: If you are serious about selling your business, we recommend obtaining either an opinion of value or a formal business valuation and a list of specific action steps you can take to improve the value of your business. These action steps can be implemented either right before your business is put on the market, or they can be taken several years in advance. It is never too late (or early for that matter) to prepare. Set a realistic asking price for your business based on the valuation.
• Financing: Either pre-approve your business for bank financing or offer seller financing. Our exit strategy includes a list of financing options for your business, along with specific suggestions.
• Exit Strategy: Planning the sale of your business is critical. We can prepare a formal exit strategy for you that examines hundreds of variables and includes a 20-30 page customized plan, along with checklists of documents you need to prepare and specific action steps you can take before putting your business on the market.
• Keep Your Business on the Market: Keep your business on the market even if you have accepted an offer unless you have agreed to exclusivity with the buyer. Don’t take your business off the market until you have a signed purchase agreement and received a nonrefundable earnest money deposit.
• Prepare for Due Diligence: Prepare for due diligence by organizing a list of documents most buyers will request. Doing so speeds up the sale process and increases the chances of a successful transaction.

Data regarding business sales is sparse and often inaccurate. However, with our suggestions, you will not only hasten the process but will also increase the chance of a successful sale.

Summary

Why do Brokers Often Require a 12-Month Exclusive Contract?

The contract length often coincides with the average length of time it takes to sell a business. Half a century ago, listing contracts were 30-60 days in length, and businesses were often sold within that time period. The time it takes to sell a business has increased steadily over the last 50 years, along with the exclusivity period that most brokers require.

Value of the Business vs. Time to Sell

Most of the factors that increase the value of a business will also have a direct positive correlation to the amount of time it takes to sell the business. The following factors will increase the value of a business, and, statistically, increase the speed at which a business is sold:

• Reasonable asking price
• Geographic area
• Seller financing offered
• Industry type

A Balanced Perspective

When planning to sell a business, you should attempt to maintain a balanced viewpoint. Remember that an average is just an average. The actual time period can vary from one day to more than three years.

To illustrate: How long, on average, does it take for a man and woman to marry after their first date? This question seems absurd when trying to estimate when your son or daughter will marry, but many business owners apply this same logic when estimating how long it will take to sell their business. Selling a business is a stressful, emotional event, and it involves anticipating other people’s responses, which is often also emotional. As a result, the data is widely dispersed, and estimating the time is difficult.