There may come a day when you’re ready to sell your business. Perhaps this is something you have long targeted. Or maybe it’s spurred by a life event, a change in personal philosophy, or circumstances out of your control.. Whatever the case, when the time does come to sell, you’ll want the process to go smoothly — and quickly. This article serves as a guide on how to sell a business quickly, including what you can do both in the short-term and long-term to expedite a sale.
Preparing for a Quick Sale: The Basics
On average, it takes roughly six to nine months to sell a business, though it may often take longer. As you begin the process, you’ll first want to hire an experienced deal team, with business brokers, CPAs, and attorneys topping the list. Doing so provides you with the expertise and legal knowledge needed to facilitate a successful sale. Your team will:
- Review your financial statements, tax returns, balance sheets, cash flow, and other similar documents and performance metrics
- Determine the value of your business
- Locate potential buyers with legitimate interest
- Negotiate the deal
- Allow the other party to perform due diligence
If you want to speed up the timeline for a quick sale, be ready to make concessions. Perhaps the business valuation will uncover areas of the financials or operations that detract from the overall value and would need several months to improve. As such, you might have to lower your asking price.
To avoid this scenario, you should start thinking about your exit strategy now — even if you’re nowhere ready to sell. The earlier you start thinking about selling, the better. Hire an experienced deal team with business brokers, CPAs, and attorneys topping the list.
By knowing what your business is worth — and building it so that it’s ready to sell — you’ll be in a much better position to sell quickly without leaving money on the table or accepting onerous terms.
Long-Term Things You Should Do to Prepare for a Sale
The key to selling a business quickly is making sure it’s prepared to sell. In other words, business owners should always know:
- What their business is worth to a buyer (otherwise known as the market value of the business)
- What drives value
- What risks associated with the business may make prospective buyers pause or submit lower offers
It might sound counterintuitive, but you should run your business as if you’re going to sell it, even if you never plan to sell. Why? Because a sellable business gives the owner plenty of options. Perhaps an unsolicited offer comes along from an interested buyer, and the offer is too good to pass up. Or maybe your circumstances change, requiring you to sell your small business fast.
Business brokers and advisors can help you prepare for the selling process. By working with them at least two years years before your anticipated sale, you allow them time to understand the type of business you operate, your market competition, and what your company is worth. The more familiar they are with your business ahead of time, the easier it will be for them to sell your business quickly.
Another bonus of getting your team of brokers involved early: it increases the likelihood that you’re satisfied with the sale. When you know what your business is worth, you can avoid the all-too-common valuation gap.
The valuation gap occurs when sellers think their company is worth more than what business buyers are willing to pay. This can slow down deals, if not derail them completely. Having a reasonable expectation of your selling price will help keep deals on track, especially if you’re looking to sell quickly.
Lastly, working with advisors early allows you to correct any deficiencies, liabilities, or areas of risk that exist in your company. Should they exist, they’ll surely come out during the due diligence process, which will slow down a sale. By correcting them ahead of time, you can boost your market value, attract a broader pool of qualified buyers, and increase the likelihood of a deal getting done.
Again, even if you don’t think you’re ready to sell, start working with a team of trusted business brokers early on. Buyers have the upper-hand in the sales process, so the sooner you can start preparing, the better off you’ll be. If you wait until you actually need to sell to start preparing, chances are you’ll be rushed and forced to make concessions that otherwise may have been preventable.
How to Sell a Business Quickly: The Checklist
In an ideal world, you’ll prepare for the business selling process long before you need to exit. But this isn’t always possible. Below is an in-depth look at how to sell a business quickly. This is particularly relevant for small business owners who have not yet prepared their company for a sale or have a sudden need to sell their business fast.
Get a Valuation
Business brokers can perform a valuation in two to four weeks if necessary. If possible, get one done by an M&A professional who can get into a detailed conversation with you about the overall sellability of your business, what buyers will like, and how they might structure an offer.
Tap Your Network for A Buyer
It takes time to run a full buyer search, and buyers don’t like to be rushed. The fastest way to sell the business is to sell to someone who already knows you and your business. This can include employees, managers, competitors, entrepreneurs, peer companies in another state, or family members. If you’re looking to sell quickly, you may not necessarily find the “right buyer.”
Offer Seller Financing
Seller financing is a part of almost every business sale. Under this agreement, you act as the bank and allow the new owner to pay in installments. By doing so, you help the buyer avoid having to secure substantial financing from a traditional bank. If you want to sell quickly you may have to “be the bank” and hold back more than you’d like. This may impact the sale price and will certainly impact how much cash you receive upfront.
Be Flexible on Terms
The problem with being in a time crunch is that you’re not in the driver’s seat from a negotiating standpoint. Be ready to be flexible — even generous — with the deal structure in order to get the deal done.
You may also have to consider the option that you won’t have a future role in the business, or that the vision you had for your company won’t come to fruition. You’ll have less negotiating power when it comes to things like operations and staying on board.
Or perhaps the opposite could be true. Maybe you’re looking for a quick exit, but you find a buyer strictly interested in the value of your business assets. One of their stipulations is that you must stay on board to continue running the company. Again, if you need to sell quickly, you’ll have less leverage to negotiate on your terms.
Hire a “Deal-Friendly” Attorney
If you need to sell quickly, the last thing you want is an attorney who wants to play hardball with the buyer’s counsel. Your attorney obviously needs to protect your legal interests, but make it clear that once you’ve found a buyer and received an acceptable letter of intent, you want this deal to get done quickly.
Selling a Business Quickly Is Possible
It’s possible for business owners to learn how to sell a business quickly, but it may not be in their best interest to do so. Selling a business quickly will likely result in losses and concessions. Your team won’t be negotiating from a position of strength and you’ll probably need to compromise to get the deal done swiftly.
To avoid such compromising situations, prepare early — at least two years before your exit date. It might sound illogical, but ultimately, you should always run your business as though you intend to sell it. When you do so, it becomes much easier to sell quickly if necessary.
If you’re looking to lay the groundwork for an exit strategy, be sure to reach out to the trusted team of advisors at Allan Taylor & Company. With more than 15 years in the M&A industry, we have the experience required to help you navigate the sales process.