How long does it take to sell a business?

It depends on the company more than the market

How long it takes to sell a business depends less on the market than on the company: on how ready its records are, how many buyers are approached, and how cleanly diligence goes. There is no honest single answer for every sale. What can be said is which stages a sale passes through, and what makes each of them longer or shorter.

A sale runs in six stages: a view of value, preparation, a list of buyers, confidential marketing, offers and the letter of intent, and diligence through closing. Some overlap, and preparation can begin long before an owner decides to sell. How to sell my business describes each stage in full; this guide is about time.

Valuation

The first stage is usually the shortest. An owner with recent financial statements and tax returns to hand can obtain a first range from the estimate at how much is my business worth, and a written assessment of value from Wild Rose Advisors once the figures have been reviewed. It runs longer where the books must be reconstructed before anyone can rely on them.

Preparation

Preparation is the stage with the widest range, and the one that most affects every stage after it. It is shorter where the financial statements already match the tax returns, add-backs are documented, the recurring base is separated in a schedule, and contracts, licenses and leases are in order. It is longer where personal and business expenses are mixed, where licenses are held in the owner's name, where a lease is near its end with no renewal option, or where the company depends on the owner for daily decisions. What buyers will ask for lists the documents to assemble.

Time spent here is rarely lost. Documents assembled before buyers are approached need not be assembled later under a buyer's deadline, and problems the owner finds can be corrected or disclosed on the owner's terms.

Finding buyers and marketing in confidence

This stage is shorter when the likely buyers are known at the outset: the strategic acquirers active in the sector, the private equity firms building groups in it, and private investors suited to the company's size. Approaching them in parallel rather than one at a time saves time and creates comparison. It is longer when the company is unusual, when the pool of natural buyers is small, or when buyers must sign a confidentiality agreement and review a memorandum before they can say anything useful. A public listing can seem faster and often is not; why most listed businesses never sell explains why.

Offers and the letter of intent

Offers arrive as indications of interest, then narrow to letters of intent from the buyers who remain. This stage moves quickly when buyers have a complete memorandum and answers to their early questions, and slowly when each answer prompts a new request. Negotiating every important term before signing a letter of intent can feel like delay. It is the opposite: terms left vague are resolved later, during exclusivity, where they add time and usually cost the owner. Reading a letter of intent covers what to settle first.

Due diligence and closing

Diligence is often the longest stage after preparation, and the one where unprepared sales slow or fail. It runs faster when the data room is complete before the letter of intent is signed, the buyer's financing is committed, and the owner's accountant and attorney are engaged early. It runs slower when the buyer depends on a bank loan still to be approved, when a landlord, a licensing authority or a major customer must consent to the transfer, or when a discovery prompts the buyer to reprice. Diligence and closing describes the stage in detail.

What can run in parallel

Some stages overlap without cost. Preparation can begin long before the decision to sell, while the owner runs the company with no buyer in view. The list of buyers can be built while the memorandum is written. The owner's accountant can review the tax effect of an asset sale or a stock sale while offers are still arriving. What cannot safely overlap is signing a letter of intent before the comparison of offers is complete, or opening diligence before the data room is ready: each saves a little time early and costs more of it later.

What shortens a sale

• Financial statements that match the tax returns, with documented add-backs.
• A recurring base shown in a schedule a buyer can verify.
• Known problems disclosed at the start rather than found in diligence.
• Buyers approached in parallel, so offers arrive together and can be compared.
• Buyers whose financing is committed.
• An owner who keeps running the company while the sale proceeds, so the results hold through diligence.

A sale can be rushed only at a cost: fewer buyers, less comparison, and terms accepted under pressure of time. An owner who expects to need a sale by a particular date is better served by planning a sale early than by compressing the stages once it has begun.

Common questions