Selling your business isn’t something to be taken lightly. In fact, for most people, it is one of the single largest transactions of their lifetimes, and can have a dramatic impact on your retirement and other life plans. Consequently, the process of selling a business can be complicated, including everything from preparation to valuation, and finally, to closing the deal.
At Ashley Capital Group, we assist business owners with navigating this process. We get proven results, yield maximum value for business owners, and help them properly plan their exit strategies and prepare for retirement. If you’re considering selling your business, then there are some questions that you may have. Let’s take a look at some of the most common inquiries that we hear.
1. How Long Does Selling a Business Take?
Since every business is unique, it is challenging to know precisely how long your business will take to sell. On average, companies typically take six to nine months to sell. However, a safe rule of thumb to follow is to assume a year from the time you start looking for buyers to the completed sale of your business.
2. What Steps Do I Need to Take Before Finding a Buyer?
Before beginning your search, understand that preparation is critical. You’ll want to eliminate as much business debt as possible so your financials will look good to potential buyers. Additionally, you should organize all of your financial information and provide projections of three to five years. Having proper bookkeeping and accounting goes a long way here.
3. What Documents Do I Need to Provide to Potential Buyers?
Give potential buyers a strong indication of your success, but limit what you show them, so you don’t divulge too much proprietary information. Start with these five main documents:
- YTD cash flow statement
- YTD balance sheet
- YTD Income statement
- Summary book of your business
- Tax returns for the last 3 years
4. How Do I Qualify a Buyer?
Before you engage with a potential buyer, it’s crucial to gauge their financial capacity and interest. There are a few ways to ensure that your buyer isn’t just casually looking. First, ask them to sign a non-disclosure agreement. Anyone willing to sign this legally binding contract is probably serious about buying your business. You can also request a financial summary and credit score. This helps to avoid buyers looking to quickly sell your business to another purchaser for a finder’s fee.
5. Once Buyer Begins Due Diligence, What Documents Should I Provide?
Once a buyer advances to the due diligence stage, you’ll need to fully open your books and provide the remaining necessary pieces of financial information. As long as you’ve had the buyer sign a non-disclosure agreement, you won’t need to worry about giving up this critical info. The essential documents for the due diligence process are generally:
- Payroll summaries
- Outstanding accounts payable
- Outstanding accounts receivable
- Sales contracts
- Lease contracts
- Profit and loss statements for the last three years
- Cash flow statements for the previous three years
- Balance sheets for the previous three years
6. How Long Does It Take to Close Once I’ve Found a Buyer?
This length of time will vary from buyer to buyer, but you can generally expect 30-90 days for due diligence, an additional 30-60 days for negotiations, and yet another 30-60 days to draft up the contracts, sign them, and close the transaction.
Clearly, selling a business is a difficult process that can take many months to complete. At Ashley Capital Group, we set our clients up for success by knowing the right questions to ask and getting the answers they need. For more information, contact our M&A advisory today at 866-565-9723.