How to Expedite the Sale of Your Business
Ideally, business owners plan for the sale of their business years in advance to allow time to plan their exit and maximize the value they get out of it. But sometimes personal or professional circumstances necessitate an immediate exit. Business brokers often refer to the "Dismal D's" as common catalysts for an abrupt sale – divorce, debt, disaster, disinterest, declining sales, and so on.
Whatever the reasons, motivated business sellers may be able to shorten the duration of the sales process, provided the financials and operating documents are in order and they're willing to concede a bit on sale terms.
Asset Sales for Struggling or Closing Businesses
If you are trying to sell a distressed or failing business with little or no income, then you may need to conduct the sale as an asset sale. This means you sell off the business assets like vehicles, equipment, and working inventory. Intangible assets like patents may also be included, although these tend to complicate and slow the transfer.For these types of situations, please see Buying or Selling a Closed Business: An Opportunity For Both Sides.
Pricing Strategy
If you are in a rush to sell your business, the most effective lever you have is price. You can expedite the sale of your business by listing it slightly below market value in hopes of drumming up a storm of buy offers. This is not an ideal negotiating position to be in, but if a quick sale is the priority, you will need to accept that you may wind up leaving money on the table.
Start with a Market Valuation
Serious business buyers focus on earnings (discretionary cash flow to the owner), so your price should be centered on a multiple of the business's recent earnings. You need to be able to document the full financial benefit your business generates for you, and use that to derive your asking price.
Most businesses with earnings under $1MM sell for 1-5 times annual earnings, and these multiples vary by industry. For example, average restaurant multiples are around two times annual earnings, while manufacturing businesses sell closer to three times earnings.
To get an idea of how pricing multiples vary, see our tables of industry multiples. If you want to get a valuation estimate based on comparative sale prices in your market, start with BizBuySell's Valuation Resources.
Adjust Your Price Accordingly
To sell quickly, you need to generate a lot of interest, and that means offering a good deal. The tricky part is setting a price that piques interest without giving the impression that there is a problem with the business. You will need to get a good understanding of what similar businesses are asking, then try to set your price towards the lower end of the spectrum.
For example, if you are selling a laundromat business and similar laundromats for sale are asking four to five times earnings, then you may want to offer yours around four.
Get Documents Organized
From start to finish, selling a business involves a mountain of paperwork. Much of the process involves buyers requesting and sellers providing documentation on financial and operational details of the business. This is especially true once a buyer makes an offer and begins due diligence.
Days, weeks, and even months can get eaten up simply waiting for documents to get into the right hands. To help facilitate the process and speed things along, get all available financials and business-related documents together and thoughtfully organized from the start. If you need to rope in your lawyer and CPA, do so early on and keep responsible parties accountable.
Create a worksheet of all necessary documents and where (or with whom) they reside, and establish deadlines for any third-parties to deliver them.
The earlier potential buyers have all the documents they need to adequately evaluate the business, the sooner a business sale can be made.
Consider Buyer Incentives
You have some options in the way you structure and market the sale that can help ease any buyer concerns, or assist in making the financing work. These incentives can "grease the wheels" of potential deals and maintain momentum:
Offer Seller Financing
The most effective tool business sellers have is to offer some amount of seller financing. Business owners that offer to personally finance a portion of the sale price – commonly around 10% - tend to close the sale more quickly, and at a higher price.
Seller financing can help expedite the sale in two ways:
- Allowing a portion of the sale price to be paid over 3-5 years can help the buyer bridge financing gaps, which are common in these transactions.
- Offering financing means the seller retains some "skin in the game". Hesitant buyers may be more willing to take the risk if the owner retains a vested interest in the ongoing success of the business.
There is some upside to offering seller financing for the seller as well, in the form of interest income and potential tax advantages.
If you choose to offer seller financing, be sure to include it in your business for sale listing, offering memorandum, and any marketing materials. This type of financing has become common enough that many buyers won't even consider businesses without it.
Include a Reasonable Training or Transition Period
Another consideration is to offer a gracious time period to train and mentor the new business owner. This doesn't have to be a full-time commitment, but rather a part-time consultancy to ensure the new business owner has adequate time to leverage your experience and knowledge to ensure business operations continue without a hitch.
Training periods in business sales vary widely depending on the nature and complexities of the business being sold. For some businesses, it may be as simple as the original owner making themselves available to answer questions for a few weeks after the sale closes. For others, there may be set hours that the previous owner will be on-site for several months. Consider how complex your business operation would be to someone brand new to it and offer a training period that allows them adequate time to leverage your experience to get up to speed.
Engage a Business Broker
Hiring a business broker adds cost, but good business brokers make up for it with higher sales prices and an efficient process. No one is better suited to sell a business quickly than brokers that do it for a living.
Avoid using a real estate broker that "dabbles" in business sales – you want someone that dedicates most or all of their practice to buying and selling businesses. They have the network, marketing infrastructure, market insight, and negotiating chops to get deals done efficiently.
Get Started
BizBuySell provides a platform for selling your business, tools and resources to understand the process, market data to value your business, and the largest directory of business brokers. Start by creating a free account and get access to all the tools you will need to get your business sale started.