This is often the second question a business owner asks me (after “How much is my business worth?”). I understand the concern. Once a business owner decides to exit her business – or at least consider the possibility of exiting – she wants to know when the exit will happen.
While reports often claim the average period to sell a business is 6-12 months, this is misleading. The honest answer is, “It depends.” Let’s walk through the major issues that determine how long it will take to sell your business.
Business Maintenance
The current state of your business heavily influences the selling time limit. How would a potential buyer view your business? For example, are your books and records up to date and well-documented? Are your accounting records current, clear, and clean? Has your revenue and net income grown for at least three years? If your business isn’t ready to sell now, you may need several months or even years to improve it.
Current Market Situation
The state of the market, including the economy, industry trends, and buyer demand, significantly impacts the time it takes to sell your business. The best time to sell your business is when the general business climate is good; the worst time is during a recession or when interest rates are high.
Business Valuation
You will need a formal business valuation from an independent and accredited expert. A qualified business valuation expert, holding either the ABV or CVA designation, will take several weeks or more to complete a formal valuation and follow-up.
Seller Expectations
The number one reason businesses don’t sell is due to owners having unrealistic expectations about the value of their business. If you market your business at too high a price, it will take more time to sell, adding to the timeline.
Finding a Buyer
Preparing marketing materials for your business and finding interested buyers takes time. This is especially true if you have a niche business or if you have specific buyer requirements. Also, your ideal buyer might be an internal person. If that person is ready to take over now, that’s terrific. But if an internal successor needs more training or experience, it will take time to prepare them to take over.
Buyer Due Diligence
Once you find a buyer, the due diligence process starts – where the buyer thoroughly examines your business and you examine the potential buyer – can take 30 to 90 days, depending on the complexity of your business.
I encourage business owners to evaluate potential buyers in both financial and qualitative terms. For example, will this buyer work well with your clients or customers? Does the buyer share your business values? How will the potential buyer interact with your employees or contractors?
Gathering and evaluating this information takes time and it’s well worth it because a good fit buyer is essential to long-term transition success.
Sale Negotiations
From my experience (both personal and with clients), negotiating terms and conditions can add weeks or months to the timeline, especially if you receive multiple offers or engage in extensive counteroffers. This is also when impatience can set in, and surprisingly, many deals fall through at this stage.
Financial Considerations
If the buyer requires financing, obtaining approval from lenders can introduce additional delays, often adding another 30 to 60 days. You’ll discover whether the buyer needs financing during the due diligence process.
Business Specifics
The complexity of your business also plays a role in determining the time it takes to sell it. Ensuring you and the buyer meet all legal, contractual, and regulatory requirements can extend the timeline, particularly if there are complex legal issues.
Sealing the Deal
After you reach an agreement, finalizing the sale and transferring ownership can take several weeks, depending on the closing procedures and any final conditions that need to be met.
Revealing the Sale
You’ll need time to communicate with clients, customers, and your team. Consider this as you plan the timeline for your exit. Depending on how your exit plan is structured, you may need to stay involved for six months or longer, adding to the timeline.
Unexpected Delays
One final caution: be prepared for unexpected delays. It could be a difficult lawyer on the other side, a key employee leaving unexpectedly, or something else. Unforeseen events may cause delays as well.
For example, I began thinking about selling my business in early 2020. The Covid-19 pandemic popped up a few months later and delayed my plans by at least two years. Hopefully, you won’t face a global crisis like this, but if you anticipate something unexpected, it will be easier to stay flexible and adapt to the situation.
A Complex Timeline
As you can see, the timeline for selling your business depends on many factors, some of which are beyond your control. I suggest starting the exit process by evaluating your business in terms of its readiness to sell before you commit to a deadline. If your business is in good health overall, you can move through the journey quickly. However, if you need more time to improve your financials or groom a successor, the process will take longer.
Let’s Have a Conversation:
How ready are you to exit your business, and how long do you think it will take to consider these factors? Do you think you could be ready in 6-12 months or 3-5 years? What concerns you most about exiting your business? I’d love to hear from you, so please leave a comment.