How Long Does It Take To Sell a Business?

If you plan to bring a business to market, it is understandable to wonder how long it will take for the sale to close from start to finish. You may have already started spending the proceeds in your head — on your retirement bucket list, on future entrepreneurial activities, on setting up a legacy for yourself and your loved ones. 

As is always the case in business, there are no guarantees as to how long it will take to sell a business. Some entrepreneurs might go from market to closing in a matter of months; for others, the entire process might take one to two years; for still others the sale might stretch on even longer. 

One to two years is a good rule of thumb, but how long it takes to sell a business in Houston, Austin, or Dallas will ultimately depend on a number of factors, including:

1. Market Conditions

How long a business may sit on the market or take to close depends greatly on the conditions of the local, national, and global marketplace. 

This is basic supply and demand — for a commodity to sell, there must be sufficient demand for that commodity in the marketplace, as well as an adequate supply of money and qualified buyers. 

If there are few qualified buyers, little demand, and a tight money supply, it may take a long time to find the right buyer, as well as time for that buyer to obtain financing. 

If it’s a booming economy and a feeding frenzy, sellers may enjoy a bidding war and have the luxury of choosing the buyer with the highest offer, the fastest path to closing, or some combination of both. 

2. The Attractiveness of the Business

For someone to be eager to buy your business — and quickly at that — your business needs to look like a good buy. Business owners can do much to “dress up” their business for sale. Measures they can take include increasing operational efficiency, cutting costs, automating, identifying new revenue streams, and doubling down on marketing and sales to increase revenue. 

These factors contribute to its valuation in terms of its “earnings multiple” (the value of the business expressed as a multiple of an earnings ratio — for example, EBITDA or “earnings before interest, taxes, depreciation, and amortization”) as well as its valuation in terms of its future earnings potential (of which scalability is also a factor).

But the cash flow statement isn’t the only place where business owners can make their listing look like an attractive opportunity. The business owner can also put attention into “curb appeal” — sprucing up or upgrading the facility or storefront, sprucing up the digital experience of a partially or totally web-based business, etc. Let’s say you were to sell a business in Austin. Pay homage to local landmarks and other notable aspects that makes Austin so special and attractive to its population, like a mural.

Another attractive feature is a complete and easy-to-understand package of financial statements. Also, don’t underestimate the attractiveness of a tight transition plan. Buyers will see your business as an attractive prospect if you have put effort into ensuring a smooth handoff.

3. Setting the Right Price

In many ways, setting the right price is the whole ballgame. Nothing will contribute to a speedy sale (or at least the speediest possible) like getting the price right. With proper valuation, the most qualified buyers will give the business immediate consideration and make fair offers. With a little luck, a bidding war might even ensue, putting upward pressure on the final price.

On the contrary, if you overprice your listing, buyers will hesitate. The business listing will sit on the marketplace waiting for offers that never come… at which point a vicious cycle may ensue. Potential buyers will notice how long the business has been on the market and begin to wonder what is wrong with it. There must be something wrong with it — why else would it sit on the market? They may be hesitant to even consider making an offer.

Business owners should therefore take valuation very seriously, seeking as much professional counsel as needed to arrive at a price that buyers will deem reasonable. 

4. The Preparedness of the Seller

Much of the speed of the sale comes down to the preparedness of the seller. The buyer may be ready and willing, but if the seller has not gathered together all the required documentation — financial, legal, regulatory, etc. — then the seller may very well become the bottleneck for the sale of his/her own business. It’s a good idea to start getting documentation ready early on in the process, as this step alone can be time-consuming. 

Additionally, the seller must be prepared to help the buyer complete due diligence. This includes a commitment to total transparency. If the seller gets cold feet or insecure, or is simply unwilling or unable to cooperate with the buyer’s due diligence, the sale can similarly drag on.

5. Marketing

Another factor in the speed of the sale is the speed with which the buyer is willing to act. To find a motivated and expeditious buyer, it helps to put the opportunity in front of as many interested eyeballs as possible. That means marketing. 

There are many channels you can use to market a business — from yours or your business broker’s warm network, to outbound marketing whereby you seek out specific prospects who might be interested in your business, to inbound marketing where you use digital or conventional advertisements to try and get interested buyers to come to you. 

Either way, marketing a business is a specialized skill and requires significant resources of time, money, and expertise. Most business owners are well advised to hire professionals to help them get the word out. The professionals at IBEX can undertake effective marketing campaigns to get your business in front of the right people.

6. The Qualifications of the Buyer

A qualified buyer is obviously more likely to close quickly — that is to say, a buyer who has the wherewithal to make good on the deal, including access to cash or financing. Proper due diligence on the buyer before you accept an offer is therefore essential to a timely closing. 

7. Negotiation

The more back-and-forth negotiation has to take place, the longer the sale will drag out. If sellers want to close quickly, it behooves them to think ahead to the different terms that might come on the table and decide what is a deal-breaker, what they are willing to concede, and how flexible they are willing to be. Certain terms, like seller financing, may help facilitate a speedy sale as well. 

8. Financing Considerations

The buyer’s intended source of financing can make a big difference in the duration of the transaction. SBA loans, for example, are notorious for having attractive terms but longer underwriting periods. Banks can also be lengthy in their underwriting. All-cash transactions or seller financing, of course, are the quickest options.  

9. Regulatory Compliance

If your business is heavily regulated, expect a lengthier transaction as compliance must be validated before the keys can be handed over. 

Ultimately, it takes time to get the best value for your business. If you need to close quickly, you may have to compromise in terms of value, terms, or both. Regardless, an experienced business broker can help you understand the length of time your specific transaction is likely to take, and what specific steps you can take to shorten the curve. So whether you’re trying to sell your manufacturing business in Austin or elsewhere, there’s always someone who can help.