How Long Does It Take To Sell A Business?
MergersCorp
Award Winning Global Investment Banking Firm with focus on Corporate Finance & Cross Border Mergers and Acquisitions
There are so many reasons- personal or otherwise- why founders sell their businesses. However, one of the most recurrent questions, when this happens, is — how long does it take to sell a business? This question does not have a simple and straightforward answer given the complexity of variables affecting various industries, countries, and business environments. Therefore, the length of time taken to sell a business varies from one business and period to another. However, on average, it takes between 6 to 12 months for businesses in various industries. We take a look at the factors affecting the length of time taken to sell a business and what founders can do to speed up the process.
The popularity of the industry or business
In practice, some businesses and industries will be more popular than others. Businesses in the prevailing popular industries may even receive offers despite not being on sale. The popularity of businesses varies from period to period and is usually dictated by prevailing market conditions. However, business owners can increase the popularity of their businesses by adopting new modes of operation, instituting new product lines, hiring unique and talented employees, and adopting new technologies.
The business sale strategy
The business strategy used to sell the business is not only dictates the final payout but also the length of time it will take to find a suitable buyer. Are you selling it alone or with the help of a business broker? Business brokers understand the market dynamics, have different strategies to attract investors, have the skills and experience to close the deal fast enough, and are therefore more likely to close the deal faster. If you are planning on selling your business, it is advisable to identify a reputable business broker to work with to speed up the process.
The asking price
This can either attract or push away potential investors. The asking price must be relative to:
As you value your business, ensure that you take all these factors into consideration, work closely with a valuation expert and ultimately come up with the correct valuation.
Marketing efforts
When a founder is selling their business, the turnaround time is dependent on the extent of marketing efforts. The greater the efforts, the faster the business will be sold. Founders can also use a combination of different marketing strategies to enhance the speed of sales. You can employ these strategies:
The extent to which the business is ready for acquisition
Investors are more interested in businesses that have a solid structure, proper documentation, healthy financials, great management teams, are easily transferable and whose risk base can easily be mitigated. If your business does not fit this profile it's time to get to work to enhance its readiness for acquisition. Businesses that may not be ready for acquisition also tend to fetch lower prices in the market incentivizing you to make it as attractive as possible.
Availability of buyer financing options
Purchasing an established, stable and profitable?business that has a projected upward trajectory is a capital-intensive affair irrespective of whether the acquirer is an individual or an organization. This implies that it may take a while to mobilize the funds required which essentially delays the sale. However, as a seller, you can approach different financiers and negotiate possible financing options for the purchaser. For the financing options to be acceptable, the interest rates must be competitive relative to market rates. And the terms and conditions must be favorable to the organization or individual acquiring your business. By organizing these financing options, once a deal has been negotiated, the funds are availed within the shortest time possible.
Other factors that may affect the speed of sale include whether it's a?Sellers’ or Buyers’?market, your negotiation skills, whether, as a founder, you plan to stay on, the value addition to the buyer upon purchase of the business, and the projected business statistics. Despite this, you can now come up with realistic expectations for the sale as well as identify how you can speed up the process. However, it is good to note that this guide does not substitute the use of experts and only aims to complement your knowledge in the field.
For more information about Investment Banking, Cross Border M&A, Buying and Selling a Business visit: https://www.mergerscorp.com
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