Expedite Selling Your Business
A common question business brokers get asked is “how long will it take to sell my business?” Research completed by the IBBA indicates that for businesses that sell for under two million dollars, it’s likely going to take 7-9 months.
Many owners aren’t excited about this answer, but there are a few things you can do to expedite the sale of your small business. Let’s explore a few of these options.
Price It Right
The benefit of having a Broker’s Opinion of Value or Value Range Analysis completed on your small business can’t be overstated. It gives you a reasonable expectation of what the market will bear. Owners can choose to reduce the sales price in order to sell their business faster. Business buyers tend to scroll through business opportunities and compare price-to-earnings (PE) multiples, so pricing a business at an aggressive PE ratio will attract more buyers and create a competitive environment for the opportunity. This will not only speed up the process, but it will also attract more potential buyers for the owner to choose from.
Put Together a Due Diligence Package
Once buyers are attracted and screened, offers are expected and, if accepted, the deal stage moves to due diligence. At this stage, a buyer typically asks for information about the business to assess whether it performs as advertised and that ownership is authentic. Buyers may ask for a plethora of information as part of due diligence, and sometimes owners aren’t prepared to share the requested documents. Not only does slow document sharing raise concerns for business buyers, but it can also lengthen the time it takes to close a deal. Proactive owners who put together a due diligence package including tax returns, updated profit & loss statements, year-end and current balance sheets, Secretary of State filings, etc., can expedite the sale of the business and send a clear message that they are ready to get the deal done.
Offer Seller Financing
When it comes to seller financing, often the perception is that buyers love it and sellers hate it. However, a huge benefit to seller financing is the fact that it can remove two-to-three months from the length of the deal. Traditional financing can take several months, and SBA financing often takes three months or more. Generally, any time the government is involved in a process, things are going to take longer. SBA financing can be a very powerful tool for goodwill-driven transactions, but it’s not the quickest way to get a deal done; seller financing is. Seller financing can also have some other significant benefits for the seller such as tax savings and higher net proceeds.
Screen Buyers Properly (Hint: California Business Advisors does this for you!)
Time is often wasted on unqualified buyers. It’s easy to get “wrapped up” in a contract with a buyer who can’t consummate the sale. The opportunity cost of missing out on quality buyers when working with a non-qualified buyer can never be recovered, and it could hurt the value of the business if the business stagnates due to deal fatigue. Properly screening buyers through proof of funds procedures, proper NDA obstacles, personality, gated access to information, and the proper use of commitment documents will help screen buyers and avoid wasted time on those who can’t get to the finish line.
Selling a business can take a long time, but using a licensed Business Broker to help you be proactive about planning, understand the process and find the right buyer will expedite the potential sale. The great thing about a business is that if it’s worth selling, it’s probably cash flowing, so unlike a car or a boat, at least it’s making money while it’s for sale – instead of losing value. And always remember, good things come to those who are patient.