How long does it take to sell a small business?

The agreed sale price of a small business for sale, is influenced by a number of factors including revenues, business category, the business location, cash flow multiples and of course, the asking price. Although these factors are important in monitoring small business sales another overlooked factor speaks to fundamental market conditions, in particular the amount of time the business spends on the market. It is possible to study the health of the market by looking at the factor of time as it can determine the demand among buyers and expectations of sellers.  

Small business owners can sometimes exhibit a sense of urgency to close a deal once deciding to sell, but the average length it takes to sell a business is usually quoted by UK business brokers as taking around 9 months. 
It is down to both luck and good timing which can potentially lead to a faster closing time, but accelerating the process of selling you business isn’t usually possible. 

Here are some tips that can help small business sellers to create an appropriate timeline to selling a business:
Gather information for prospective buyers: To make the transition of a sale as smooth as possible, sellers should prepare a sales memorandum, containing relevant information and gather at least three years of detailed, variable financial statements to show credibility and to include an income statement, cash flow statement and balance sheet. Sellers can avoid mishaps by working with an accountant to present 'clean' financial statements adjusted for abnormal and non recurring items, of income and expenses. 

Start with the right advisers: The business owner’s advisers will largely determine the direction of the transaction. Business owners should be looking for: Corporate finance advisers, corporate lawyers and tax experts, in addition to their accountant. 

Establish a desired sale price: Sellers can work with a professional appraiser or business broker to discuss the current market specific to their particular industry and set realistic valuation for the business. Valuations can take up to two to three weeks, sometimes longer. Of course, the watch word here is to not reveal the asking price.... 

Prepare for listing: Sellers should be encouraged to create a list of prospective buyers and compile all business sale information, including public listing content. Get 2 to 3 potential buyers in case the initial deal falters and converse with the potential buyers regularly. Remember to leave some room to negotiate the price but never agree on one that you feel is unreasonable. 

Profit handling: Take some time, before spending the profits from the sale. This would enable you to create a plan outlining your financial goals, learn about tax consequences associated with sudden wealth, your accountant should be able to help you with this. 

These steps can differ from business to business and this is due to each business facing a broad range of different challenges in the business lifecycle. It’s important to lay out a plan of action that is unique to your business needs. 

At Moore (South) LLP, we can help you with these steps. Our services mean that we can provide you with a tax expert and an accountant and we can even offer you a business valuation. If you would like to have your business valued, please contact Andrew Stevens, andrew.stevens@moorestephens.com.