There are many factors that play into the length of time a business stays on the market between its official listing date to the moment of its contract close. Timing, especially, plays a big role in this area. It is important to put in solid preparation efforts prior to listing a business for sale otherwise it may needlessly sit on the market for longer than anticipated. Making sure the business is the best it can be by the listing date, including clean and organized financial documents and good legal standing will set the business up to move quickly. Finally, keeping realistic expectations of the business sale process and the real-time it can take to find the right buyer is important to recognize.
The following discussion brings up the many variables that can affect how long it takes for a business to sell. However, these factors should be taken with a grain salt. Each business is unique, making each sale process different.
- At this point in time, the market for business sale is warm to hot. The economy in Colorado has vastly improved since the recession and has developed into an active growing market. This circumstance, however, is ever changing and in a year or so the market may settle down or could even recede a little.
- Right now financing for business acquisition is also relatively cheap, but this too could soon change.
- Supply and demand for a specific type of business will affect the time to sale as well. Take for example the frozen yogurt business. Five years ago, this type of business was appearing on every corner, but now the market is saturated. This does not mean buyers will not purchase a frozen yogurt business, but it will likely be more difficult to locate a buyer that will.
The Business's Specifics
- How big is the business? Bigger is not always the best case scenario as a bigger business will only amplify the difficulty of owner and management responsibility.
- How profitable is the business? High profits and good profitability is always a good thing. Buyers want to purchase a business that is going to make them money.
- How much competition is there in the market? Extreme competition will detract from the business's salability.
- Does the business have a strong history or community reputation? A lengthy history or good reputation will speak for itself and help buyers take the plunge to purchase.
The Operating Structure
- Does the business have an operating manual or documented processes and procedures? If so, the business will move more quickly because it is already setup for success. This documentation will also serve the owner well when answering due diligence questions.
- Is there a trained and competent staff in place that is charged with running the day-to-day operations? This will encourage a buyer to purchase because it will help make the transition from previous to current owner seamless.
- Can the owner be easily replaced without detracting from the business's success? In the same vein as the last question, a buyer is looking for ease of transition. Any and every factor that makes the move from one owner to the next easier and will help the business move quickly.
- Do you plan to sell the business yourself or will you use a broker? While it is not impossible to sell on your own, using a broker is better advised. A broker's sole job and experience is based around the business sale. They are certified real estate agents and must complete continuing education coursework on an annual basis. This all contributes to the broker knowing exactly how to frame your business to interest buyers. They also have access to a large professional network that can even connect them to an interested buyer before the business is officially listed for sale.
- Does your broker have access to partner professionals in the legal, accounting and financial fields that can support deal closing? Partner professionals will provide expertise and support in areas outside of the business brokerage field and will facilitate a quick close.
- Does your broker have a track record of successful transactions? Experience alone can make for a quicker sale. A broker with a good background will be able to use their accrued knowledge to provide the best plan of action for the sale of a business.
- Is your business priced to sell? A broker can help the owner develop a price within the sweet spot? that takes into account both profit and salability, but ultimately the seller has the final say. If the seller chooses to value the business differently than the broker advises than this can prevent the business from selling quickly.
As a final point of consideration, we can present our business sale statistics. The length of time between the listing and closing of a transaction in the Denver metro area is an average of eight months. For businesses sold through Transworld Denver, the number is a little less than the area average, coming in around six months. As previously mentioned, all of the above factors need to be taken for what they are - simply factors. They will manifest themselves differently within each business listed for sale. Some businesses languish on the market for much longer than expected, while some businesses are blessed to sell quickly. But with the help of Transworld's certified brokers, any business for sale will be marketed to its best advantage, giving it the highest probability of a fast sale.
For more information on buying and selling a business in Colorado visit www.tworlddenver.com or to speak with a broker schedule a consultation today!
Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master's Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.