Once you’ve decided that you want to sell your business and determined that it is legitimately salable, you’re all in for the exit. True to the entrepreneurial spirit that got you this far, you expect to accomplish your goal. It’s not a matter of if, but when.
“When will I be out?”
“When will we have that celebratory toast?”
“When will the deal be done?”
The Short Answer You’re Looking For
You’ve read enough articles on the internet leaving you with little insight except: “There’s no one-size-fits-all answer.” While that certainly rings true in this arena, I can give you a simple answer to start:
If your business is priced correctly to the market, we should be able to sell it within 6-9 months. Now, let’s talk a little more about what that means and what’s at play.
Fair Market Value
When I say, “priced correctly,” I’m referring to fair market value. Remember, fair market value is what willing buyers will pay for the business. If you only have one offer, that offer stands as fair market value until there are other buyers interested—at which point fair market value rises.
Time vs. Money
When you, the seller, aren’t happy with fair market value and seek to sell the business for more than the market says it’s worth, the simple answer I gave earlier no longer applies. Instead, we have to consider time and money. Do you want or need to sell the business quickly—even if it means lowering your expectation for the sale price—or are you set on your sale price and willing to wait it out?
Let’s say you want to sell your business for $1 million, but your lone offer (aka fair market value) is $800k. We can eliminate time from the equation in favor of a fast sale for $800k. Or, we can take the time to pursue your optimal sale price of $1 million. If you choose the latter, we know that the one buyer you have isn’t going to bid against themselves and magically come up to your number. The goal, then, becomes getting in front of as many potential buyers as possible to give your business the best opportunity to attract multiple buyers (and thus a higher sale price, a.k.a. more money).
Patience Isn’t Always a Virtue
If your sale price isn’t aligned with fair market value, it can take over a year to sell the business—likely at a lower price than you envisioned. Yes, it’s completely possible that we could find the one buyer out there who is willing to pay your price for the business. But more often, owners who go this route wind up hurting their sale price (and the business itself).
Rarely does the market move up to the owner’s price, and once you lose your motivation to run your business with the same fire as if you weren’t planning to sell, things tend to change. You generate fewer sales, lose sight of profitability, stop investing in equipment, etc. These are all things that make the business worth less in the long run, all because you’re waiting for an offer that may never come.
Are you considering selling your business? Wondering how much it’s worth and how soon you can exit? See why it’s so important to hire a broker.