How long will it take to sell your business?
How long will it take to sell your business?
“How long will it take to sell my business?” is a question we are frequently asked by business owners.
However, there are also a host of other common questions we get that relate to the time it takes to sell your business. So we thought it would be useful to answer as many of them as we can in this article.
Hopefully the information will be useful and help you on your journey towards the quick sale of your business.
Is it easy to sell a business?
Unfortunately, it's impossible to answer that question with a simple yes or no. When it comes to selling a business, the ease of sale depends on so many variables such as how prepared your business is and financials are, what the market is like, your valuation of the company (the potential sale price), and the quality of your business broker.
If everything is in order, your business is performing well, and there's an appetite for your business among potential buyers, then the selling process will be easier. But not necessarily easy.
How quickly can you sell a business?
One of the first things that business owners want to know when selling their business is how long it is going to take.
The quick answer is that, according to our own metrics, typically 70% to 80% of our client's businesses sell within 12 months from retaining us to completing the sale, and 30% of these complete within 6 months.
It should be noted that the answers above are the average time it takes. Each business sale is different and brings its own challenges with it.
The speed at which you can sell your business typically depends on the sector. We've found that sectors that include a large number of players that find it difficult to grow organically tend to see more business sales. The reason being is that one of the easiest ways to grow a business in that sector is to buy a competitor.
Businesses we have sold within 6 months include IT, telecoms, facilities management, commercial cleaning, and accountancy firms. These sectors are constantly regrouping and consolidating; buyers are normally trade buyers with cash reserves looking to grow their client base with service contracts which bring in regular recurring revenue.
Businesses we have sold within 6 months also include a number of precision engineering businesses. Whilst recurring service contracts are not the norm here, customers of engineering businesses tend to have constant demand and are loyal to, and dependent on, suppliers who deliver quality precision-made components on time.
How do you know how much to sell your business for?
The valuation of your business depends on so much. And we've written an excellent article on it here.
In short, prospective buyers will consider a number of factors about your business if they are considering purchasing.
- They look at where the business is located, how much money it makes, cash flow, what contracts are in place, what type of business it is, and what the sale price is.
- They'll look at the management team and how well placed the business is to be run effectively when you're gone.
- They'll look at how crucial you are to the business. And the less things rely on you, the better.
Which buyers act quickly?
The best type of business buyers for a smooth sale process are ones with cash reserves in place for the size of the deal. Buyers who need to raise bank loan finance will have to convince the bank and their management that the deal is right, and due diligence will often need to be done by both the bank and the buyer's management.
Experienced trade buyers will be able to make their own decisions quickly and take a pragmatic approach to due diligence focusing on the real business issues and asking relevant questions. Larger institutional buyers will tend to use larger accountancy firms to conduct more forensic due diligence which can be more time consuming.
Availability of information
The availability of up to date management information is key to a smooth sale. Having management accounts for the latest month, each month, and being able to respond to detail questions quickly will not only save time but will also give the buyer confidence that the business is well run.
If the information a buyer needs to know is clearly laid out in the Information Memorandum, the buyer will be able to make a clear decision about your business and whether it is right for them. When it comes to due diligence, being prepared with all your contracts (clients, employees and suppliers) and articles of association to hand and up to date will avoid delays in the transaction process as well as reduce your legal costs.
This stage of the business sale is generally more intensive than the others, as you need to be on hand to answer questions and provide as much information as your potential buyer wants. Of course, working with an experienced business broker will help to lessen the load for you.
Take time to find the right buyer – but keep the momentum
It can take some time to find the right buyer for your business in order to secure the best deal value and structure. And it is important that your business broker and M&A advisor takes the time to turn over every stone to find this buyer. However, keeping the momentum in a transaction is key to completing your sale successfully.
Events happen, situations and outlooks change whether on the buyer's side or yours. Having an experienced business broker to manage the sales process from start to finish will ensure a successful sale.
For in-depth information and practical advice on the whole process of selling your business, check out our Ultimate Guide.
If you have any questions for us about selling a business, please fill out the contact form below, or give us a call on +44 (0) 20 8090 9380.