How long does it take to sell my business?
On average, it typically takes between six to nine months for most businesses to be sold. However, it's important to note that this timeframe varies. Some businesses may take longer to sell, while others may be sold in a shorter period. There are also cases where a business may not sell at all. The sooner you gather all the necessary information to initiate the marketing process, the shorter the selling time is likely to be. Setting the right price for the business right from the beginning is crucial. Some sellers mistakenly overprice their businesses, assuming they can always reduce the price later. Unfortunately, this approach often backfires as potential buyers tend to avoid overpriced businesses.
Research indicates that the down payment amount can significantly impact the speed of a sale. Generally, if the down payment is lower, around 40 percent of the asking price or less, the time required for a successful sale is shorter. A reasonable down payment also communicates to potential buyers that the seller has confidence in the business's ability to generate enough revenue to cover the payments.
Why Is Seller Financing So Important To The Sale Of My Business?
Surveys have revealed that sellers who demand full cash payment typically receive only 70 percent of their asking price on average. On the other hand, sellers who are open to accepting terms or financing options receive an average of 86 percent of their asking price. That's a significant difference of 16 percent! It's worth noting that many businesses listed for an all-cash transaction often struggle to find buyers. However, by offering reasonable terms, the likelihood of a successful sale increases significantly, and the time from listing to closing is greatly reduced. Unfortunately, many sellers are unaware of the potential benefits and interest they can gain by financing the sale of their business. In certain cases, this approach can substantially increase the overall amount received. Furthermore, it demonstrates to the buyer that the seller has confidence in the business's ability to generate sufficient income to support itself.
What Happens When There is a Buyer for My Business?
Once a potential buyer shows significant interest in your business, they will typically submit a written offer or proposal. This offer may include one or more contingencies, often related to a thorough examination of your financial records and other crucial aspects such as lease agreements or franchise contracts, if applicable. You have the option to either accept the terms of the offer or make a counter-proposal. However, it's important to note that if you decline the buyer's proposal, they have the right to withdraw it at any time.
Upon initial review, you may not be entirely satisfied with a particular offer. Nevertheless, it is crucial to carefully evaluate it. While it may have some shortcomings, it could also possess certain favorable aspects that deserve serious consideration. There is an old saying that states, "The first offer is generally the best one the seller will receive." This doesn't necessarily mean you should accept the initial offer, or any offer for that matter. It simply emphasizes the importance of thoroughly analyzing all offers.
Once both you and the buyer reach an agreement, it is essential for both parties to collaborate in fulfilling and resolving the contingencies outlined in the offer. It is crucial to fully cooperate during this process to ensure transparency and avoid giving the buyer the impression that you are hiding any information. At this stage, the buyer may bring in external advisors to assist in reviewing the provided information. Once all conditions have been met, final documents will be prepared and signed. After the completion of the closing process, funds will be distributed, and the new owner will assume ownership of the business.
What Can I Do To Help Sell My Business?
When a buyer expresses interest in your business, they will expect to review updated financial information. If you work with accountants, you can collaborate with them to ensure the availability of current records. In the case of involving an attorney, it is important to ensure their familiarity with the business closing process and the specific laws of your state. Additionally, it's worth inquiring whether their schedule allows for their prompt participation in the closing process, should the need arise. If both you and the buyer aim to finalize the sale swiftly, typically within a few weeks, unless there are factors like licenses that may cause delays, it is crucial not to wait for the attorney to find time to prepare documents or attend the closing. Time is a critical factor in any business sale transaction. Failing to meet the scheduled closing time allows the buyer to reconsider or make alterations to the initial proposal.
What Can Business Brokers Do and What Can't They Do?
Business brokers are skilled professionals who play a vital role in facilitating the successful sale of your business. It is essential to have a clear understanding of what a professional business broker can and cannot do. They can assist you in determining an appropriate price for your business and devising a sale structure that benefits both you and the buyer. Their expertise lies in identifying suitable buyers, engaging in negotiations on your behalf, and guiding you through every step of the transaction until its successful completion. Furthermore, they can provide valuable support to the buyer throughout the business purchasing process.
However, it is important to recognize that a business broker is not capable of performing miracles, especially when it comes to selling an overpriced business. Most businesses have the potential to be sold if they are priced and structured correctly. It is crucial to understand that the actual selling price of a business is determined by the market. The willingness to accept a down payment and the terms of seller financing can significantly impact not only the final selling price but also the overall success of the sale itself.
