Selling your business in a hurry is not recommended, but sometimes you do need to sell your business fast. We examine the time a normal sale process takes and provide ways you can speed it up and get a fast business sale?
What is a typical process for selling a business?
The broad steps for getting a business ready for sale can be broken down into:
Understanding the business valuation.
Positioning the business to get the best sale price.
Identifying the likely buyers and exit strategies.
Preparing documentation and being transaction ready.
Seeking and communicating to buyers that really want your business.
Executing a sale process.
Securing a deal or offer.
Conducting due diligence.
Implementing the deal.
This process, if done properly will typically ensure you get the best price for the business by maximising the profits of the business, getting the structure right, attracting the right buyers and allowing an effective sales process to happen.
However this process can also take between 1 - 3 years depending on the industry, business and economic conditions.
In reality the longest steps are either step 2 or step 5 (although securing the deal and due diligence can sometimes get repeated and take longer than normal). We can determine the business valuation in less than 2 weeks. We can identify the best exit strategies you should focus on within another 2 weeks.
But positioning your business so that a buyer knows exactly why they want to get hold of it takes longer. Making sure the reported profits and cash flow highlight the key strengths of the business and the consistency that a buyer can rely on takes time.
Step 2 (positioning the business) is all about improving the business so that any buyer can clearly see:
A high level of ongoing EBITDA.
Consistent results that show growth over a period of time.
Have effective processes in place.
Minimal key person risk.
Clear development and communication of the competitive advantage of the business.
This can often take 12 - 18 months if the business is not making sufficient profits. We have detailed the features that highly valuable businesses possess in our Top 5 Checklists download - subscribe at the link above.
How fast can I sell my business?
Well prepared businesses have been known to sell in less than 3 - 4 months from approaching the market to executing the deal.
There are occasional stories of a business selling in less than 2 weeks. Often this does not include the execution of the deal, where legal processes can often take a month of longer.
In most cases this has happened because the buyer has previous knowledge or dealings with the business. In this case they have less "fear of the unknown" and are more likely to agree to an attractive deal.
If the business is a small business, with clear financial reports and simple in operations, then once you get agreement with the buyer, the due diligence, contract preparation and execution will typically take approx 4-6 weeks. This is typical of businesses with revenue less than $200k - $300k.
With larger businesses the complexity and time starts to increase. Often the larger the business (and in most cases the higher the price) the more risk there is to the buyer. So they will want to review key areas in more detail, such as:
Checking degree of recurring revenue and repeat customers.
Extent of customer relationships and arrangements.
Processes involved in sales and marketing.
Compliant employee arrangements and obligations.
State and ownership of any tangible assets.
Level of documentation of operations and training.
Management of the business team.
Compliance with any regulatory requirements, including ATO and ASIC.
These checks are often part of due diligence, but can also happen as part of the initial investigation of the business. Depending on the size and nature of the business these checks can take considerable time and money.
In most cases a fast sale happens because:
The business is performing well.
The business owner (or the advisory team) has prepared the documentation.
The buyer knows the business and trusts the business owners.
The business is well known and established in the industry.
Can selling for a lower price make it a fast sale?
It sounds obvious - just drop the price and the business will sell - and we assume it will sell fast!
The problem is the process in getting a buyer to say YES is not one dimensional - it is rarely just about the price. It is also about other critical factors such as:
Does the buyer accept the perceived risk of the business?
Does the business match the vision or expectations of the buyer?
Has the review of the business been straight forward and relatively easy?
Is there a clear path to generating a greater than acceptable return on investment.
There are many examples of a business that has been bought for a "rock bottom" price, but there are hidden risks that the buyer uncovers later. These can include:
Legal claims associated with a product or service failure.
Injury or damages claims from current or past employees.
Hidden damage to equipment or sudden equipment failure requiring immediate unplanned investment or capital expenditure.
Sudden changes in technology (eg streaming technology reducing demand for hiring movies) that reduce the demand for the products or services.
Changes in technology that increase the profitability of competitors and result in a loss of market share.
In these cases it doesn't matter that the business was a low price - the buyer is exposed to risk that typically requires more investment or capital.
So dropping the price of a business is no guarantee of a fast sale and can also be an indicator that other issues or risks exist. A cheap business can be a sign of a bad investment.
Can business brokers sell my business fast?
Yes - they can - that's what they do well - as long as they can find buyers fast.
A business broker will promote it to a wide and diverse network. This gives you the most exposure in the shortest time available. The more promotion, the more it will cost (sometimes).
In this case you are opening up to financial buyers and the deal will almost certainly result in a low price and terms that may lock you in to the business to counter any key person risk.
You will also run the risk of your employees and your customers knowing you are up for sale. This can make maintaining an ongoing profitable business very difficult and risky.
We have explained more about business brokers and other groups that can sell your business in our article Who Can Sell My Business.
The Buyer That Knows Your Business
There is one avenue that can often lead to a quick sale, and allow you the chance to preserve the price without having to resort to a low ball offer.
With any business there will be a group of people that know your business and most likely know you. If they know and trust you then there is a conversation you can have with them that may lead to about selling your fast. It may mean you have to "bare your soul" to people you know. But you may also get a fast sale at a reasonable price.
The best way to identify this group is to sit down with a checklist and go through your suppliers, customers, employees and related competitors and even close associates ask "which one of these people may gain a benefit from buying my business?". It may be a small list, however we have seen many deals done fast when the buyer knows the vendor and understands the business.
In this case it pays to have an exit strategy specialist to assist the process of approaching potential buyers and having a very simple and confidential conversation.
How do you sell a business fast and still get a good price?
So we have determined that:
Just discounting the business will not necessarily speed up the sale price.
Getting a good price involves dealing with the buyer objections effectively and efficiently.
And if steps 1 - 4 are already in place, such as:
Business is performing strongly and consistently.
Business is structured ready for a sale.
You know your price range and the right exit strategy.
Documentation is ready.
Buyers are at the table.
Then the process (steps 5 - 9 above) can proceed very quickly. This is when a 3-4 month sale is more likely than a 1-3 year process.
In this case all the documentation is ready for review, the buyers get a defined window to review and ask questions, you request expressions of interest from all the buyers, then review the offers to see who you talk to first. This type of "expression of interest" approach can produce the best results in the shortest time.
In this case the exit strategy timeline is driven by the business owner and their advisory team, not the haphazard approaches of different buyers.
So you can sell a business fast if you are ready and have done the hard work first. Talk to your business adviser or exit strategy specialist to find out if you are ready for sale and whether you are likely to attract a premium.
If you want to explore your options send us some questions and we would be happy to discuss your circumstances free of charge.