This article is one of a series that offers insight and guidance into the process of buying selling or valuing a business. Whether you want to buy, sell, or appraise the valuation of a going-concern business, these articles provide specific guidance and references to help you accomplish your goal.
How Long Does it Take to Sell a Business?
by Tom West
IIn a recent survey (February 2008), conducted by the listing web site Businesses For Sale (www.businessesforsale.com), 62 percent of the business brokers responding stated that it took them nine months or more from listing to sale. Only 28 percent reported that it took six months or less from listing to sale.
Nine months, or longer, to sell a business that’s hard to believe! Our last survey, conducted in 2006, stated that the average time between listing and sale was 7.9 months. At this rate, it won’t be long before it takes a year, or probably longer, to sell a business. Our survey also reported that the average listing period was 10.7 months. It seems to us that the way these time periods are increasing, listing periods are going to have to be at least a year or more. In fact, it wouldn’t surprise us if not too long from now, business brokers will have to take lifetime listings. We haven’t quite figured out whether it will be the seller’s life or the broker’s.
As we have repeated many times, when we first got in the business, we took 30-day listings. (At that time, a long listing period was 45 days.) Listing periods then became 60 days, then 90, then 120. Now, listing periods are pushing a year.
What can be done to speed up the time between listing and sale? First, constantly remind yourself of the business broker’s motto: “Time is of the Essence!” Too much time is often spent getting the business ready to go to market. Gathering the necessary paperwork, preparing a business profile and checking the seller’s price against your price does take time, but how much? A big part of the problem, as we see it, is that once you have a six-month to a one-year listing, time loses its importance. It would be interesting to see how fast a business goes to market if some regulation popped up that said all listings must be no longer than 90 days.
A new listing should be introduced immediately in an office; it just should be marked that it is not a complete file yet. The broker should also put the listing on the various web sites right away. That will make the listing associate get the job done. As listing associates, we wanted to get our listings into play as soon as possible.
Here are a few other tips:
- If you’re in an office with other associates, give them a copy of the new listing right away. You can tell them that you’re working on gathering the back-up materials, but you wanted to give the listing to them in case they might have a buyer looking for a similar business.
- Gather the back-up information as quickly as possible. The seller has to understand that you can’t really go to market until you have it.
- Ask the seller if they’ve ever been asked whether the business might be for sale. Many times the seller has had inquiries from interested people.
- Ask the seller for information about trade associations. Check with these associations, as many offer listing services on their web site or in their publications.
- Your office should have a monthly bulletin mailed or emailed to buyers informing them of new listings, price changes, etc. Make sure your listing is included.
- Make sure your listing appears on all the internet sites your office subscribes to.
- Stay in constant contact with the seller. New information such as increased sales, new customers, or anything else that might be of interest to a potential buyer should be communicated to the seller as well as to your associates. Update the ads on the internet sites. Push for a price reduction, lower down payment, etc.
Quite frankly, the increased time from listing to sale that is taking place so quickly is one more big reason for co-brokering. A seller is usually most anxious to sell right after offering it for sale. One way to speed up the activity is for business brokers to have to tell the owner of a small business, who has a pressing need to sell, that it is going to take nine months or more to sell it. We think the owner might look at other options, talk to another business brokerage firm or, most likely, try to do it himself.
Remember, time is of the essence!
About the Author
||Mr. Tom West is the editor/publisher of The Business Broker, a monthly newsletter for the business brokerage field. He has written or co-written numerous books including the The Business Reference and Pricing Guide and The Resource Handbook for Business Brokers. He is a founder, past president, and former executive director of the International Business Brokers Association (IBBA). He is a frequent lecturer and seminar leader on all aspects of buying, selling, or appraising a business. Mr. West is probably the most knowledgeable individual in the country today concerning the issues of buying or selling small to mid-sized businesses.
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