Selling a business, you’ve spent most of your working life to build is one of the most important personal and financial decisions most business owners will ever make, and for that reason, it’s important not to wait too long.
The best time to sell any business is when you don’t need to – not when the owner’s health, or other personal circumstances, or business pressures demand it. When the business is doing well and has a string of successful years immediately behind it, with the promise of doing as well or better in the coming years, it will attract the most qualified buyers and bring the best price and terms. When it appears that the business is no longer growing and may be headed for a period of declining sales and profits, its selling price will be much lower.
From experience, we recommend that our selling clients begin the process 2-3 years before they believe they will really be ready to walk out the door for the very last time.
Typically, most businesses may benefit from making a few changes/improvements to command the best price and terms and it may take from a few months to a year or more to implement those changes. Once you believe the business is ready to go to market, you’ll need at least twelve months of solid, clean financials – and ideally, the most recent tax return – to “prove” to any buyer that the business is really generating a certain level of cash flow.
In addition to developing the financial statements that prove the business’ cash flow, you will need to assemble quite a bit of additional information on the business’ history, employees, vendors, markets and customers served, quality and technical certifications, business licenses, distinguishing sources of competitive advantage, etc., to create a complete presentation book for qualified buyers which helps explain why your company would be a good investment.
Once the business is ready to go to market, some businesses have sold in as short as six months, but the average tends to be closer to a year, with some businesses requiring more than a year before finding the right buyer and the right deal.
Lastly, once the business sale closes, the buyer will often want the seller to stay for 6 months to 1 year or longer, to ensure a smooth transition for customers and employees.
In summary, the entire process from the time you make the decision to sell, to the day you walk out the door for the very last time, can take 2-3 years.
If you know of a business owner who’s thinking of selling or buying a business and who might benefit from a complimentary, confidential, consultation with us, have them contact me directly at:
firstname.lastname@example.org, or one of the other managing directors at Transworld M&A Advisors.
Mike Ertel, CBI, M&AMI, CM&AA
Transworld M&A Advisors
©2019 J. Michael Ertel PA