Selling your business fast is never the preferred option. Unfortunately, making a quick deal may come with strings attached, like a lower price or compromises around future business location and how the company will be run.
However, sudden changes in personal circumstances like illness, death, divorce or external opportunities may force you into a corner and you may start considering your options.
Knowing what these options are and the specific give and take choices involved will make your decision easier. Here, we’ll go through the details of the potential considerations and how they can affect how fast your business will sell.
How long does it take to sell a business?
It’s worth having a benchmark of how fast a business sells on average.
If you ask most business brokers how long it takes to sell a business, they are likely to give you a ballpark of 12 months.
The reason for this length of time is the fact that you and your buyer need to do the necessary due diligence to evaluate the true value of your business. A serious buyer will need to know all the financial details – but they will also be interested in how the company is run, what your processes are, who your customers are and how likely they are to continue using the services after ownership transfers.
Depending on your niche and operational complexity, selling a business can take weeks, months or even years.
So is it even possible to sell a business fast?
Yes, it is possible to sell a business quickly, but this doesn’t come without compromises. The question then comes down to which compromises you are happy to accept – and which you are not.
Fast sales are not impossible. The quickest business sale we ever completed took around 6 weeks from signing up the client to completing a deal. There were a few reasons why this was possible.
The company in question was a boat hire business. There were no premises and no staff. Operations were uncomplicated. The only assets were a number of boats and a collection of tools. Mooring rights, boat ownership and website domain names were simply signed across to the new owners on completion. Simplicity was the key to this fast sale.
It’s not always such smooth sailing when it comes to selling a business. The larger the company becomes and the more complex the set up – the longer the trade will take.
“When we meet with new clients we will ask them when they WANT to sell their business. The joke answer is always ‘yesterday’. Then we ask them when they NEED to sell. It’s a subtle difference but a crucial answer. The sooner someone needs to sell, the more compromises they will have to make in order to achieve that deadline. This biggest compromise is the price.”Paul Dodgshon
What influences business handover speed?
There are a number of factors that are likely to affect how long your business will take to sell. Your business buyer may want to pick up the running of the company from you and keep existing operations the same. Often, however, selling a business means incorporating it into another business’s operation or the buyer wanting to make substantial changes.
Premises and fixtures
You’ll need to establish if your buyer wants to keep your location. If they have an existing site, you’ll need to arrange the closing down of your office or shop.
If your premises need to be closed down, the sad truth about fixtures and fittings is that they become a burden. Whatever assets you thought they were, they almost never achieve a second-hand sale price which represents their true value.
The outcome for your business site depends on your current ownership status. If your premises are at a break in the lease, you can simply hand them back. If not, you will continue to pay rental on them until such time as you can extract yourself from the obligation. If you own the premises, they may stand empty for a while whilst you try to find a new tenant or a buyer.
All these options may facilitate or hinder the sales process.
Managing staff relationships during business handover is arguably the hardest part. Employees have protections under TUPE and will transfer to the new business, but if the new business location is on the opposite side of the country, it will inevitably mean redundancies.
What we find is that owners have seen employees settle down, start families and they have supported one another through hard times. Because of complex employee relationships, a director may insist that whoever buys the business keeps it local. This is to ensure that staff are retained and their employment continues. This narrows down the pool of potential buyers who can meet this expectation. With that, a fast sale becomes harder to achieve.
To sell your business quickly, you may need to consider opening up to the possibility that your staff will be let go during the process.
Type of buyer
Staff considerations seem closely connected with the type of buyer who will purchase your business.
Naturally, if you’re interested in a quick transition, you should consider selling to a competitor. One of the best ways to guarantee a fast sale is to simply sell your trade to another business in your niche. This is where one buyer will buy the customer base, trade, stock, etc. from the selling business to amalgamate it into their own.
What they usually don’t want are the premises, the staff, the fixtures and fittings.
If you are happy with such arrangement, this may be the best way to ensure a quick sale.
Another consideration around handover speed is what price your business is likely to achieve and how quickly you need the money.
If a buyer feels rushed, or you cannot satisfactorily provide the information they are asking for, they may make an offer to buy, but that offer may be as low as 10% cash on completion with the rest paid by instalments over a number of months or years. The danger of this is that you relinquish control of your business to someone else and they may not be as successful as you have been. This puts your additional payments in jeopardy.
The only reason you would accept such a proposal is if you need to sell fast and you don’t have other offers to consider.
How open you can be about your upcoming move is another big factor in the speed of a sale. If you are able to advertise freely, you get more of the right buyers because they know exactly which business they are looking at from the start. They will know you by reputation and no doubt through competition.
If that openness will damage your business by jeopardising contracts, staff or longstanding customers, you have to present the sale confidentially. This slows the process down.
Your business will need to be sold either by providing very limited information in public postings or by approaching potential buyers directly. The process naturally takes more effort and more time.
Ongoing supplier relationships could be vulnerable during a sale. Your suppliers may want to re-evaluate any obligations and arrangements under new ownership and impose greater constraints, like shorter payment terms. Stay open about the transfer and reassure your suppliers as early as possible. If viable, negotiate new terms as part of your sale preparation so you are able to finalise a business transfer quickly.
Your customers may also be concerned about the changes to your business. Depending on how close your relationships are with your clients and how complex the services you provide are, they may be worried that the level of care could decrease.
Your potential buyers will also need reassurances that your customer base will continue to use the business.
The more uncertainty around this topic, the longer the sale is likely to take. You can take steps to ensure customer retention after the sale by having comprehensive operations processes in place and having robust agreements with your customers.
The less your business relies on you, the owner, to run successfully, the faster your sale will be likely to happen.
In addition to the factors already mentioned, you need to take into account payroll, VAT, corporation tax, warrantees, indemnities, refunds, returns and other operational and legal factors. Each component adds complexity and extends the time it takes to sell while it is examined by the buyer in detail.
The dangers of selling your business fast
Quick handovers may be inconvenient – but they can also expose you to unwelcome situations.
It takes time to consider potential buyers in detail. You need to separate those who value your business from those looking for a bargain. It also pays to be able to spot enquiries from people who don’t have the necessary funds or those who are simply being nosey. It may not surprise you that the less desirable buyers are at the front of the queue when a new business goes on the market!
As business brokers we are on the look-out for the tell-tale questions that less desirable buyers are likely to ask:
- How long has the business been for sale?
- Is anybody else interested?
- Are the sellers open to offers?
- Will they take payment by instalments?
Beware of buyers that are not genuine. At best, they will waste your time, taking you further away from your goal of selling fast. At worst, they can drive you to undervalue your business and end up with a bad deal.
A buyer who values your business for what it is now and what it can become will always take their time to understand it fully. They won’t rush you with lowball offers and payment structures before they’ve even met with you. They also won’t compromise on their due diligence investigations.
What steps can you take to ensure a quick business transfer?
Before you make the decision to sell, it’s important to consider why exactly you need to go that route. Have you actually thought about leaving your business behind?
There are alternatives you may want to consider or additional activities you can do to improve your situation. For example, your reasons could be less financial but more to do with the fact you are not able to be as involved in the business. In this case, you might be better off finding a business partner to share responsibilities with. You may also be able to employ an additional manager or consultant to help you with the running of the business.
To encourage a fast sale of your business, below are some extra things you can do to make it happen:
- Make your business appealing to buyers: keep records up to date, comply with legislation changes, and generate recurring revenue streams.
- Document your processes and ensure your staff are able to run the business without you.
- Reach out to potential buyers. As selling your business to competition is one of the fastest ways to sell, it’s worth being proactive. Ensure you don’t damage your business during the process by employing an intermediary who is experienced in negotiating between parties while keeping confidentiality.
- Ask your staff if they are interested in buying. If your business is financially stable and you have low staff turnover, this could be a win-win situation for all parties involved.
- Propose a transition period where you can stay in the business for a period of time, offering training and exhaustive handover to the new buyer.
Unfortunately, some circumstances take us by surprise and there is no choice but to sell fast and make the compromises outlined in this post to achieve that.
In all other circumstances you should be giving yourself as much time as possible to sell. At least 12 months and longer if you can.
The business brokers at Uscita are experienced in supporting business owners from initial valuation, through preparing due diligence, increasing value and facilitating a sale. With our personal approach, we look at each business individually to ensure the best exit for each client.
If you’re considering selling your business, ask us about our free business valuation service.