How long does it take to sell a business? After having decided to sell your company, this is one of the first questions that will arise.
There is no standard answer to this question, it depends on the complexity of the operation, and in turn, on the size and circumstances of the company to be sold. But generally speaking, the sale of a company takes from 9 to 12 months to complete. In some cases, it can take up to 18.
Time is money, and in the case of a company, quite literally. The key to maximizing the value of our company during the sale will be determined by knowing where our time and money are in this process.
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Why does it take so long to sell my company? Factors affecting the selling time
There are several reasons that justify the investment of time in this operation. If you want to realise a sale with all the value obtained in a long life of wealth creation, the first and best strategic decision is to invest in hiring specialized advisers.
Selling a business is a complex process.
Factors affecting the time it takes to sell for the seller
For the seller:
- It is the most crucial decision of their life. Considering that it is a process that they will go through only once in their life, it is normal that the preparation for this decision brings time for reflection and analysis.
- If the company also has several shareholders, imagine the time it takes to reach an agreement between all of them about the sale’s objectives.
- Selling your company means putting the future of your employees and their families in other hands, with the responsibility that goes with it.
- The seller can make errors of judgment forced by emergencies, such as health problems. Even in that case, having a trusted advisor allows you to face your personal reality with the peace of mind of knowing that your company’s sale is in good hands, without having to accept the first offer that is presented to you. A good advisor can also help you identify the best time to sell your company.
Factors affecting the time it takes to sell for the buyer
Other factors that will affect the time it takes to sell your business are not under your control. These are those related to the buyer:
- The buyer needs to check and ensure that the value of his purchase is real.
- When it comes to investing our money, rushing is never good advice, and preparing the necessary documentation that reflects the real value of a company requires time and professionalism.
- Ideally, if there are several potential buyers, they should work in parallel, but this is not always possible. As a consequence, this analysis time will be multiplied by each buyer who wants to move forward in the process.
Factors affecting the time it takes to sell the business regarding the process
Finally, from the point of view of the process itself, all this time is required to maximize the company’s value and carry out the unavoidable phases of a sale and purchase transaction, with all the necessary documentation and negotiations.
Doing all this while ensuring that the company does not lose value during the sale process is not an easy task.
And here another question comes as a surprise: can my company lose value during all that time? The answer is, sadly, yes.
The sale is a very long process, and if the seller dedicates themself exclusively to this process, they may lose contact with the company. That makes its results decrease and, therefore, its value.
As an entrepreneur, the time you dedicate exclusively to the sale of the company will reduce its value and the possibility of profiting from the sale.
«The best way to spend your time as an entrepreneur during the sale of your company is to dedicate yourself to it until the process is complete. It is your best contribution to the process, leaving the fieldwork to professional advisers and supervising them.»
Time frames for the phases of the sale
We arrive at the sale process itself, the hard work of analysis, search for buyers, negotiation, preparation of documentation, and closing agreements. Doing all this work effectively requires a considerable investment of time and affects how long it can take to sell a business.
Below, we outline the steps so that you can get an idea of the approximate time invested in each of them:
1. Analysis phase of the company and the operation
To make the most of your time in selling your business, there are a number of initial decisions you need to make:
- In this first phase, you have to reach an agreement with shareholders and prepare the company for a sale.
- Specify whether you want to sell part of the company or all of it.
- Choose the type of buyer: national or international; financial or industrial.
- Find out whether there is a need for additional work on the development or improvement of the company.
- Finally, define an appropriate work schedule for the project.
This phase should not take more than 1 month.
2. Phase of preparation of the Valuation Report and search for candidates
Two documents are prepared: the blind teaser and the company’s Information memorandum.
The Information memorandum must reflect the reality of the company and its most positive aspects. This way potential investors have the necessary information to assess the purchase.
Once the analyst team has all the information about the company, they can prepare the sales notebook in 1 month.
The Valuation Report helps the seller know their company’s value and can take 1 month to prepare.
Consult our valuation E-book and many more in the ONEtoONE Library.
Regarding the search and screening of candidates, it is one of the most difficult phases and requires a greater investment of time.
Being able to filter up to 700 applications, this phase can last up to 1 month.
3. Investor Search Phase and project presentation
This phase is time-consuming in assessing the interest of all potential buyers. For each selected application, you must find the appropriate contact, and send each of them the teaser of the operation, as well as a confidentiality agreement (NDA). The objective is that each one returns the signed NDA so that the company’s Information Memorandum can be sent to them.
Consider that you have to negotiate with many people simultaneously and with each one in different phases. So this phase can easily take 2 months.
4. Negotiation phase of the sale between buyers and sellers
In this phase:
- The seller and buyer finally come into contact.
- The necessary documentation is sent.
- A period of resolution of doubts (of all kinds) is started.
Until a Binding Offer materializes, a resolution usually requires many conversations. The buyer requests exhaustive information and consults with his own team and with the seller. You need full confidence in your investment.
This period can last an estimated time of 2 months, depending on the agility of both parties’ responses: seller and buyer.
5. Due Diligence Phase
Due Diligence is a process of profound and professional analysis that the buyer commissions about the company for sale. The buyer wants to make sure of the value of what they are buying and contacts auditing companies and tax specialists to prepare a document that can cost between € 40,000 and € 100,000. All this searching, analysis, and coordination of information delivery between the two parties can take up to 3 months.
6. Closing
And finally, like a mountaineer who believes that the ascent has finished and discovers that there is still a small mound left before he can reach the top, we arrive at the closing phase.
After the agreement, the closing requires the preparation of a Sales Contract or SPA. A specialized commercial lawyer must prepare this document. The preparation and negotiation of this contract and the parallel documentation (such as shareholder agreements) can take between 1 and 2 months.
It is possible to make the time frames profitable and even shorten them
Now you have an idea of the process and its timeframes. Maybe you will ask yourself one last question: is it possible to shorten the timescale of the sale of the company? Yes, it is possible.
The key to shortening how long it takes to sell a business is planning, with professionals who know how to provide the appropriate documentation and who have experience in negotiation. By presenting the information in an agile and clear way, fewer buyer doubts will arise, and the timeframe of the sale will be shorter.
Additionally, advisors understand decision times and know the times of the year when activity slows down. Knowing this, they avoid unnecessarily lengthening the buying and selling process.
You would not build a house without an architect. Similarly, the recommendation is that you do not sell your business without an advisor’s help.
Conclusions
It takes a long time to sell a business, therefore investing in professional advice will save you time and will help obtain the highest possible price for your company’s sale. While it is true that time is the most valuable resource, money also matters. We can use both wisely to help you face this crucial moment in your professional life: your company’s sale.
Are you considering the sale of your company? If you need professional advice, please contact us or fill out the following form:
