When you start a small business, you may think that you’ll own it forever, right? Well, there will come a time to sell a small business and that time may be joyful or tearful, exciting or frustrating, liberating or challenging. Whatever the case, know that selling a small business takes place about 10,000 times each year. Understanding the process and taking the proper steps to sell a small business can make this activity smoother and more satisfyingly successful

Reasons to Sell a Small Business 

There are many reasons that may influence you to sell a small business. Those reasons include finding a more attractive or more profitable opportunity, dealing with boredom or burnout, facing severe financial pressures or possible bankruptcy, and dealing with significant and perhaps unforeseen competition. The reasons can include the death of a partner, a disability or other health reasons, ownership disputes, a divorce, relocation, or retirement. 

How Long Does It Take to Sell a Small Business 

The estimated duration of selling a small business varies by source. It can take 8 to 10 months, according to one source; from 6 to 11 months, according to another source. Whichever time duration you expect, it is important to be realistic about the amount of time it will take to sell a small business. The bottom line is that it’s usually not fast. 

Of course, the actual time required will depend on the following factors: 

  1. The purchase price. Generally, the higher the expected sales price, the longer it will take to complete a sale.  
  2. The type of buyer. The selling price will impact the type of buyer and the type of buyer will determine how long they will take to purchase the business. A common type of buyer is an individual buyer, and he/she will generally apply for a loan that will take 45-90 days for approval. A strategic buyer will often be a business owner in the same industry as yours and they will need to respond to corporate and regulatory requirements, so approvals may take longer than for a private purchase. A private equity group buyer is generally a sophisticated buyer that will ask many questions which will expand their due diligence period. But once that is completed, their financing will usually take place more quickly. 
  3. The industry your business is in. Industries have varying rates of profitability, thus the higher the rate of profitability, the more interest there may be in a purchase. Home services businesses typically are attractive to buyers due to their consistent revenue streams and good profit levels. 
  4. The location of your business. Some regions, cities, and geographies within cities may have greater appeal to buyers than others due to their growth, regulatory conditions, and economic factors. 
  5. How your business is structured. If your business is structured with well-defined operating processes, runs well, and has detailed financial information, it will be more inviting to potential buyers who will want to be up and running as quickly as possible with as little risk as possible. 
  6. How promptly and completely you provide the required information to brokers and buyers. Buyers will want detailed financials, typically including 3 years of tax returns, P&Ls, a listing of accounts receivable, and a comprehensive listing of both assets and debts. They will require a complete list of utilities, detailed standard operating processes, and lease agreements. 

Two specific aspects required to sell a small business may require extensive time to complete: due diligence which can take 2-3 months, and closing, which can also take 2-3 months including meeting compliance requirements and financing. 

Tips to Sell a Small Business 

Use these tips to sell a small business. First, plan for the sale as far in advance as possible. Second, be clear in your reasons to sell. Third, be emotionally and intellectually prepared to sell. Fourth, be completely honest in all aspects of the selling process. And fifth, be proactive in all selling activities. 

Seek Professional Business Coaching Assistance 

Contact Blue Diamond Consultants, for coaching services based on extensive experience through previous success for home service provider businesses. Looking to sell your small business in a few years? Let us help get your business in the best shape for the most profitable sale.