Business owners are often looking to sell there business in the shortest amount of time possible. Because the sale of businesses is often compared to real estate sales, the expectation is often that the business will sell within a 30-60 day time frame. This is not an accurate expectation, and thus, it can take much longer to sell a business. The two questions below are ones that we hear frequently and the answers are ones that we often give our clients.
Is selling my business like selling my house?
While Selling a Business is often compared to selling Real Estate, this comparison is not accurate on multiple levels.
- Confidentiality: When selling real estate, signs and advertising shout out “This Home is For Sale”. In the current DFW Real Estate market, homes are sold well within a 30 day window. The sale of a business is highly confidential. Buyers must be carefully screened before they are allowed to sign the Confidentiality Agreement required to provide the Buyer the name, location, and summary financial information on the business.
- Uniqueness: While most houses are in a neighborhood primarily have the same square footage and floor plan, that anyone could live in. No two businesses are alike. You business has a unique culture: the employees, the customers, the products and services offered, and how you stand behind them separates your business from all others. Thus, it takes time to find just the right buyer to continue your Legacy of Success.
- Financing: Banks love Real Estate. It is a tangible asset that strengths their balance sheet, and can be easily resold within percentage points of the asking price. Financing a business is another matter. Most of the value of business is intangible and specialized lenders need to be utilized to finance the sale of a business.
- Courage: Everyone needs a place to live and more than likely at some time will buy a home. The decision to leave the security of a job, with a 401K and benefits, to grab a hold of the American Dream of owning their own business, is a scary prospect. In truth, most will never take the leap.
- Connection with the Buyer: When selling a home, you will almost never meet the buyer. Selling a business requires that the buyer and seller meet a number of times and post sale, the business owner will train the buyer and transition the business for weeks or months after the sale, depending on the complexity of the business.
How long will it take to sell my business?
There are many factors that influence how long your business is on the market. Some factors cannot be controlled, such as the current market condition. However, there are many factors that the seller has control of:
- Asking Price in relation to Profit
- Transparency of the financial information
- Diversification of the customer base
- Elimination of Owner dependency
- Willingness to Seller Finance a portion of the purchase price
The main reasons for a business not selling are:
- Unrealistic Asking Price
- Business highly dependent on the owner
- One or two customers generate the bulk of the revenues
- Financial statements are inconsistent, casting doubt
- The parties are unwilling to negotiate mutually acceptable price and terms
The national average from listing to contract is approximately 184 days. Minimizing red flags for a buyer can aggressively decrease the time your business is on the market.
How can Gateway MA assist me in shortening my selling time?
Your Gateway Broker will be honest with you about realistic expectations for selling your business as well as a potential asking price. They will assist you through the process of determining a sales price and down payment that will attract buyers, while also making sure that Business Owners receive fair compensation for all their hard work and investment. In addition, your business broker will offer assistance with getting 3rd party financing arranged, if necessary.