How Long Does it Take to Sell a Business?

How To Make Your Business Attractive To Buyers

One of the most common questions we get from new sellers is “How long will it take to sell my business?” It’s a fair and important question as we know there tend to be plans happening around the sale. It also might make you feel a bit better to state the obvious: selling a business isn’t something most people go through on a regular basis. To make matters even more complicated, there isn’t a ton of great information out there to illuminate what can sometimes be a tricky road. Good thing you’re here because we walk this road every day! While it’s true no two deals are exactly alike, rest assured we’ve seen enough to steer you in the right direction and avoid common pitfalls. This post is meant to summarize the stages we commonly see when working with small business owners. Even though your deal may differ in one way or another, you can expect to touch on many of these milestones throughout the lifecycle of the sale.

Timeline to sell a business

Prepare to Sell

This is the stage where you get your ducks in a row so you can put your best foot forward when you go to market. You’ll need to get your paperwork together to produce a business valuation as well as a data

room. Though sometimes tedious to compile, your business documents are critical for attracting serious buyers and concluding a deal. Once you’ve compiled all the required information on your business, it’s time

to list the business and kick off the marketing campaign.

Market the Business (3 Months)

During the marketing phase, Business 4 Sale Business 2 Buy is here to assist you with your listing. This is where your listing will introduce the business to prospective buyers (we do this via our internet-based marketing strategies). You want to safely promote your business to potential buyers through Business 4 Sale Business 2 Buy and drum up excitement about the sale of your business. The thing to focus on at this stage is keeping the communication lines open while continuing to run your business, showing buyers it is in a good state and making a profit.

The timeline of selling a business in South Africa is mainly affected by the following factors:

  1. Purchase Price:

The purchase price of a business is the number one ranking factor that can affect the timeline of selling a business. If the return on investment (ROI) percentage is too low and the payback period is too high, it will take longer for buyers to be interested in buying the business. A higher ROI percentage is better as the return on your investment would be bigger. The purchase price for a business will depend on the asset value. An asset value is composed of tangible assets (inventory, equipment, accounts receivable, etc.) and intangible assets (brand name, customer base, business reputation, etc.) If the purchase price is too high compared to the asset value, it can significantly delay the selling process or pose a risk to potential buyers. Most buyers ask: “If I keep my money in the bank with no risk, will it be better than purchasing a business with risks attached?” The answer to this question is that if the return on investment is significantly better than what they can expect from a bank, then it is worth their time and effort to purchase the business.

  • The Type Of Buyer:

The type of buyer that is interested in a business can also affect the timeline of selling a business. Most buyers prefer to purchase an established business with a significant track record and history, as opposed to a start-up or new business that has yet to establish itself. For instance, if you are looking to sell a software development company, then technology companies and venture capitalists would be your ideal buyers. If you are selling a retail business, then private investors and small business owners would make better prospects. The type of buyer affects the timeline because they often have different criteria when it comes to evaluating potential investments. An experienced investor might take much less time to evaluate a business than an inexperienced one. Buyers also have different budgets. For example, visualize a pyramid. At the bottom of the pyramid, there are more buyers with R1 million or less to spend on a business, while at the top, there are fewer buyers with R30 million or more. The timeline of selling a business can be affected if you have few buyers who can afford your asking price.

  • The Type Of Industry:

Not all industries are created equal in terms of their selling potential. Some industries experience higher demand and faster growth rates than others. According to Business Tech, sectors such as fintech, renewable energy, commodities, and agriculture continued to thrive even during the COVID-19 pandemic. This clearly indicates that these industries are robust therefore high in demand, and can quicken the sale.

  • The Location:

The location of your business can influence how long it takes to sell. Some regions are more attractive for buyers, while others have fewer investors and, therefore, fewer transactions. Popular locations in South Africa that attract more business buyers are Gauteng, Western Cape, and KwaZulu Natal. This is primarily due to the high population and economic activity in these provinces. Location can also refer to the specific setting of the business. Some buyers prefer work-from-home type of businesses, whereas others prefer to purchase businesses in a specific mall. This means that buyers have an idea of what kind of business they want to buy, and this can affect the timeline of selling a business.

Close the Deal (3 Months)

This is fun for some and anxiety-inducing for others. We know that you are deeply connected to your business in a lot of different ways and that deals can get emotional because of all the effort you’ve poured in over the years. We’re here to guide you through the process with current information on market trends. There can also be some interesting financing structures in small business deals that we’ll help you understand. On the other end of the deal, the buyer will finish the final round of diligence and get the structures in place for hand-over.

Transition Period (1-3 Months part of Close the deal)

Chances are the buyer didn’t buy your business to just take over a lease. They paid a premium against the value of the assets because they know they are buying a living, breathing, cash-flowing business. As such, the new buyer will want to make sure they’re extracting as much of the goodwill value as possible—the transition period is key to realizing that value. The best way to ensure the business continues to hum along smoothly is through on-the-job training, introductions to employees, customers, and suppliers, and generally being available for advice during the transition period. The good news for you is that you’ll likely continue to get paid during this period while simultaneously de-risking your Seller Note by training a competent new owner.

Hopefully, you now have a better understanding of the four main phases in the sale process. We also want to reiterate that these are just meant to serve as guidelines. In reality, every business is different. So let us assist you by taking out the difficult part of the whole process – finding a buyer! List with us Business 4 Sale Business 2 Buy today! The perfect platform to buy or sell your business.

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