When you come to the decision that you need to sell your business, for whatever reason, you’ll inevitably want the sale process to run smoothly and quickly. But how long does a business take to sell in the UK?
The average business sale process takes between 6 and 12 months. There are many variables that can speed up or slow down that sale process. Some are totally within your control, whilst others aren’t. Factors like your geographic location, market conditions, the type of business your own and its industry niche will impact the sale but you can’t do much about them. However, getting your business ready for sale and having the right financial, legal and marketing processes in place will speed things up.
Here, I’ll run through the business sale process. I’ll give you an understanding of what you need to do to speed up the selling process and secure a successful sale of your business.
Why sell your business?
There are many reasons for selling businesses. Maybe you’re ready for pastures new, you want to retire, set up a new business or use the cash elsewhere.
Being a business owner can be all consuming. It’s easy to find yourself trapped in a cycle of long hours, constant problem-solving, fire-fighting and a seemingly endless to-do list. That’s why I’ve coached many business owners in building a business that can work without them. For many, they want to take more of a back seat so that they can reclaim time for themselves and their families. But if you want to sell your business, it’s imperative that it can function without you at the helm. You need an exit strategy and a business that you can step away from without it failing.
5 steps in the business sale process
Selling a business is exhaustive and time-consuming. The average time varies from 6 to 12 months from start to finish. But that said, some businesses take years to sell. Sorry, that’s probably not the timescale news you wanted to hear!
As with so much in business, and life in general, preparation is key. Get your house in order before you start the sale process and you’ll be in a better position to start marketing to potential buyers.
1. Prepare your business
This preparation phase is totally within your control. Time well spent here will result in a smoother, more efficient sale of your business.
Start to prepare your business for sale by sorting out your financial information. A thorough financial audit is recommended. Get your financial statements ready and up to date, including income data, balance sheets, cashflow statements and tax returns.
If you’ve ever watched Dragons’ Den, you know that they always implore entrepreneurs to know their numbers. When they don’t, the dragon always responds by saying, “I’m out!” Any prospective buyer will want to know that information too. Prepare your financial statements to be scrutinised by interested buyers.
Update all of your business’ essential information – contracts, agreements, leases, licences, customer lists and so on. Get professional advice and support from your solicitors and accountants. They’ll need to get your documentation ready for inspection too.
2. Find the right business broker(s)
I think this is a really important step. The business sale landscape is a bit of a ‘wild west’. It’s not as regulated as the property market. Find a business broker (or brokers) that you trust and respect.
What’s the value of your business? You need a business valuation that’s realistic and fair. It looks at assets, liabilities, income, and potential business growth. A detailed valuation helps you to set a fair asking price. It can be a strong negotiating tool.
3. Marketing your business
There’s no Rightmove where all businesses for sale get advertised. More’s the pity. So you’ll need a comprehensive marketing strategy to find the right buyer for your business. Showcase your business’ unique selling points, positioning it as an attractive proposition. Create a high quality, confidential information memorandum (CIM) with a business overview, financial details, potential for growth, and other important details. You may want to engage an M&A advisor to drive forward this stage of the sale process.
Networking is a powerful tool here. Tap up your industry contacts. Attend relevant industry events to get your business noticed. Word of mouth is a great way to spread news of your business sale opportunity. That extends to social media channels like LinkedIn, not just in person networking.
Your business broker can help with this. They’ll match you with prospective buyers in their network, and can help to qualify leads.
4. Due diligence process
A serious buyer will issue a Letter of Intent (LOI). Then the negotiations start to secure the best price and the best deal possible. As the prospective buyer will be accessing your sensitive business information, it’s good practice to ask them to sign an NDA to protect that data.
In this phase, the buyer checks that the information you’ve provided is accurate. It involves detailed reviews of financials, contracts, legal info, and operations so it can be a lengthy process.
5. Closing the deal
You can expect a lot of to and fro as you negotiate the final purchase agreement, along with a final sale price that you’re happy to accept. Once the final documents are executed, the sale transaction is complete.
What factors influence the time it takes to sell a business?
There are factors that are out of your control, but will impact the sale process time. These include:
- Business geographic location
- Financial performance
- Industry niche (if your business is in a heavily regulated industry, specific approvals may be required)
- Number and quality of interested buyers
- Size of business (bigger businesses take longer to sell).
But there are factors that are entirely in your hands. These are aspects that you can affect in order to speed up your business sale.
Have your numbers to hand: potential buyers need to have all the information about your business to make an informed decision.
Create a handover document: a lack of operational documentation can slow things down.
Ensure it can work without you or your team: your business should be built so that the buyer could hire an MD to step in and run your business smoothly. There can’t be an over-reliance on your relationships with business clients or on the knowledge of existing team members as they may or may not stay after the sale.
Be clear about what you’re selling: the brand, the team, the premises, the data? Be specific about what the business sale comprises.
Find the right business broker or brokers to sell your business: using these professional experts can reduce the time spent finding the right buyer. They have networks of potential buyers that they can match to your business. They’ll also advise you in best practice.
Prequalify the buyer: make sure they’re a serious potential buyer. Also, buyers who already have secure financing in place can proceed swiftly. If they need funding, it’s likely to take longer.
Advise your legal and financial advisors: ensure they’re all set to get things moving, to share appropriate documentation and finalise contracts.
Are you planning to sell your business?
Planning and preparation are fundamental if you want a smooth and swift sale. Make sure your business is in optimum condition to sell at the best price. Get your ducks in a row – financial, legal and operational. Know your numbers and have the right people on hand to advise and guide you through the sale process.
I can help you to ensure your business can work without you. We can prepare your exit strategy and transition your business to being less reliant on you, your knowledge and customer relationships. It’s a key process before you even consider putting your business up for sale. I’d love to help you navigate this exciting, yet potentially tricky, stage. Let’s chat about working together.
