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How long will it take to sell my business? This is the third most common question that small business owners ask of me.  Unfortunately, it is not nearly fast enough for all parties involved in the sale.

If you look at the statistics for selling a business, most experts will say that the sale of a small business will take on average 6-12 months to sell.  More accurately it is usually 9-12 months to sell.

I had the sale of my business completed in about 6 months.  But I was able to sell my business to another franchise owner in the Budget Blinds family. They knew the business model, they understood how we marketed the business, they understood the products, the customers, we had no inventory.

In a normal transaction for a small business sale there are eight or so steps that happen over the course of the sale:

Prepare A Business Valuation 

When I sold my business, this took me over a month. As a business broker I can prepare a valuation in about 1 week (from the time I have all your company’s financials).

Prepare an offering package 

My offering package consisted of my financial documents for the business (tax returns and profit and loss statements) and information on how I marketed the business, where my leads came from and my average sales for residential and commercial clients.   I normally create a Buyer BLI (Business Listing Information) sheet, which 3-4 pages long, which is a teaser about the business but is strictly confidential.  Then I create an Agent BLI (4-6 pages), which I can send to other business brokers that has more information about your business, but still confidential.  Then I create a Confidential Information Memorandum (20-30 pages), which has all the details of the business that I have gathered and put into one place for buyers to review.

Develop A Marketing Plan

My marketing plan for my previous business was simple, contact the other franchisee that was interested in buying my business.  Had he not gone forward with buying my business, I do not know what I would have done.  As a broker we will create a marketing strategy that is unique to your business.

Implement Marketing Plan & Screen Potential Buyers

All buyers that want to look at your business and all the information we have gathered has to sign a non-disclosure document.  This is probably the biggest mistake I made in selling my franchise.  I did not ask the buyer to do that.  We had a gentleman’s agreement that he would not say anything, but somehow people found out I was selling.  As a broker, every potential buyer must sign our standard NDA from Murphy Business and Financial protecting the fact that you are selling and all of the data/information we provide on your business.  They also need to be financially qualified and we must feel that they have the ability to run your business before we will let them talk to you directly.

Conduct Buyer/Seller Meetings

My buyer and I met a few times in person to discuss the sale.  We needed to talk about what I was including and about the value of my business.  We also had quite a few phone conversations about it. I think it took him around 6 weeks of discussions before he agreed that he wanted to buy me out.  As a broker we have a script we follow in your first meeting with a buyer and subsequent meetings.  We also require that all communications between the buyer and seller go thru us, because we want to filter out emotions from both sides that can cause hard feelings and potentially kill deals.  We never let the buyer and seller talk price in the first meeting.  It is a meet and greet between both parties to decide if you like each other and can work with each other and for the buyer to learn more about you and your business. Some buyers need one meeting to decide that they want to buy your business, some need more.

Offer to Purchase/Letter of Intent

If the buyer decides that they are interested in purchasing your business, they will either submit and Letter of Intent to buy the business or an Offer to Purchase, with contingencies, such as conducting due diligence to confirm the information you provided and due a little bit more investigation into your business to make sure the business is “As Advertised” and securing favorable financing.  When I sold my business, our franchisor had a standard LOI for us to use.  I had to state that I was selling to the buyer and the proposed purchase price.  The buyer had to sign off on it saying he was interested in buying my business.  Usually an LOI is a little more complicated, it just depends on the deal.

Buyer Due Diligence

The due diligence process is usually one of the longest part of the sale process.  In my case it was under 2 weeks.  As a franchise, there were not many secrets the buyer didn’t already know.  It can take 2 weeks to 3 months (or longer) depending on the buyer and the size of your business.  Some buyers will usually talk to their team of professionals (accountant, financial planner, attorney, etc) about your business during this time.  They will have them look over your tax returns and book keeping. They will want to know more about your employees, contracts you have in place, upcoming sales/revenue, etc.  If there is a franchise entity they will need to be qualified by the franchisor.  In my case we had to work with the landlord to get the deal done.  He had to agree to let the buyer assume the lease, which took about a month to finalize.

Financing & Funding A Business Sale

My buyer went to 3 different lenders and received 3 different reactions to buying my business.  He wasn’t happy with any of them.  It was by sheer accident he was talking to his residential loan officer and mentioned how he was trying to find a way to finance buying my business.  His credit union ended up giving him a small business loan.  As a business broker, we have relationships with SBA and commercial lenders.  We pre-qualify your business for a loan (meaning that a bank thinks that your business is worthy of getting loan).  If a bank will not pre-qualify a loan for your business, then we will work with you for seller financing options and scenarios or see if we can find a non-traditional lender to help you out.  Some buyers will work with family members for a loan or take out a loan from a 401k or other retirement account.

Business Sale Closing & Transfer

My attorney created the purchase documents for the deal between the buyer and I to transfer my franchise and all of the goodwill, customers, lease assignment, etc.  The franchisor had other paperwork for us to sign to relieve me of my responsibilities and have the buyer assume my territory.  The buyers bank had to draft a loan document and a check to me for the purchase.  If there is real estate involved, then a title company becomes involved.

So, when a seller asks me “How long will it take to sell?”, all I can do is smile and say, only time will tell ….

About Pat McAdams, Wisconsin Business Broker

I grew up in a family-run business. Growing it into a seven-location operation wasn’t easy. And, neither was the decision to sell it. Most of my 27-year career has been in small business—the last 14 years spent building and then selling a Budget Blinds franchise.

I found my passion, however, helping other entrepreneurs sell their businesses. And, now I’m bringing that passion to Murphy Business.

Why? My experience selling my own business made me realize there were few companies helping small business owners value and prepare their business for sale, find buyers, and close the deal. Even fewer offer fair valuations and unvarnished advice to ensure your valuable time isn’t wasted chasing false expectations.