How long does it take to sell and close on a business sale?

The average number of months to sell a small business is 6 to 12 months on average. Many Business take longer and others will sell quickly. Some Businesses in Hot segments can get multiple offers in a a few weeks, but that is the exception and not the rule. In my years of experience, the more preparation time on the offering, the shorter the market and time to close the deal. 

“Luck is what happens when preparation meets opportunity”

What is your salability score and why does it matter?

This makes a difference on how many months it takes to sell. Just because a business is profitable doesn’t mean it is salable. For a solo or small owner-operated business, the goal is to prove to a buyer that the business can survive—and thrive—without you.

Here are the specific qualities that make one small business worth significantly more than another:

1. Low "Owner Dependency" (The "Vacation Test")

The #1 value-killer for small businesses is when the owner is the "secret sauce." If you are the only one with the relationships, the technical skill, or the "magic touch," a buyer isn't buying a business—they’re buying a stressful job.

• The Goal: Could you leave for 30 days and the business still function?

• The Fix: Transition clients from being "your" clients to "the company’s" clients. Use a CRM to document every interaction so a stranger could pick up where you left off.

2. Documented Systems (SOPs)

A salable business is a "turnkey" machine. A buyer wants to see a "Playbook" that explains exactly how the business runs.

• Quality Indicator: Do you have Standard Operating Procedures (SOPs) for lead generation, client onboarding, and closing?

• The Value: Systems reduce the "risk of the unknown" for a buyer. They are paying for the shortcut you built, not just the revenue you generated.

3. Recurring or Predictable Revenue

Buyers hate "lumpy" income. In real estate, this is tough because it's often transactional, but certain models are more salable:

• High Value: A brokerage with a property management arm (monthly recurring revenue).

• Medium Value: A brokerage with a robust, automated lead-gen funnel that consistently spits out $X in commissions for every $Y spent.

• Low Value: A brokerage that relies entirely on the owner’s personal sphere of influence or "word of mouth."

4. Clean, "Audit-Ready" Financials

Many owner-operators run personal expenses through their business to lower their tax bill (the "lifestyle" business). While this saves you money now, it destroys your sale price later.

• The Quality: Use a professional bookkeeper to ensure your "Seller's Discretionary Earnings" (SDE) are clear and easy to verify.

• The Red Flag: If a buyer has to spend weeks "un-mingling" your personal life from your business profit, they will likely walk away or demand a huge discount.

5. A Diverse Client Base

If 50% of your revenue comes from one developer or one major client, your business is high-risk. If that client leaves, the business collapses.

• The Quality: No single client should represent more than 10–15% of your annual revenue.

Don't Let Your Business Be Part of the 80% That Fails to Sell.

Public data shows that out all the active Business for sale listings, less than 20% are successfully sold annually. This means 80% of advertised businesses for sale do not sell. When a sale fails, these businesses often close, leading to the vaporization of Billions of Dollars in seller sweat equity.

The key differentiator is size: while most non-sellers have under $500k in SDE, businesses with $1 million or more in EBITDA are highly desired, with an 80% to 90% chance of selling. We focus on helping you overcome these odds.

Why do so few Businesses for sale actually sell?

There can be dozens of reasons why a business never sells; below are some of the most common:

1. Priced too high, no justification for the price (no basis for asking price) Businesses for sale with a 3rd party valuation are 5 times more likely to sell.

2. Business acquisition cannot be financed. (Buyers want leverage, Sellers want to cash out)

3. Poor record keeping (tax returns, sellers do a good job of burying income, buyers cant find it and are unwilling to pay for income that cannot be proven).

4. Not packaged correctly. Need to explain full value of the company in writing.

5. Sellers won’t sell for what they make in a 1 to 2 years. (what is the seller's motivation?)

6. Business and accounts are too dependent on the seller. (the business owner does everything).

7. Desirability - owners responsibility and hours required to operate successfully are too burdensome for most buyers that want to maintain a quality of life).

8. Management and employees not staying after the sale (mostly family owned, family run).

9. Outdated or changing service and/or product (i.e., Uber, Amazon infiltration into segments).

10. Too much working capital required. (not enough cash on cash return to justify the risk for buyer)

What do we do to get your business sold faster for more money?

The first step for Businesses owner with less than $1mm in Seller's Discretionary Earning (SDE) and is thinking about selling is to look at the Direct Market Data Method (DMDM). This assumes an “Arm’s Length” transaction. Direct Market Data Method (DMDM) relies on the principle of substitution. A buyer will not pay more than the price at which they can obtain an equally desirable substitute. The DMDM uses parameters of comparison in the form of income multipliers, which can be either Gross Net or Seller’s Discretionary Earnings SDE.

This is not the end all for valuation but rather a starting point to gauge the market. If you don’t have a buyer for your business and you want to sell, you will be going to the market to sell your business. One of the main principles in market pricing is the “Principle of Substitution”. This principle says that the maximum value of a business or property usually is established by the cost of acquiring an equivalent substitute business or property that has the same use, design, and income. In other words, “why would a buyer pay Y for what you are selling when they can buy a similar X for less? It is important to have market data if you are going to the market to sell. Privately held Business sales are not in the Public Record, your Business Broker needs to have access to and or subscribe to private databases of sold business in order to take the market approach into consideration.

How can we help you Sell your Business?

Simple Steps we use to bring your odds of a successful transaction from only 20% up to over 80%

1. Justify the Business asking price for both Buyer and Seller. Prepare a comprehensive Business Valuation using several methods of Valuation. We have access to thousands of comparable sold businesses. Not being able to justify the price is the number 1 reason why most businesses never sell.

2. Set up financing to buy a business, pre-qualify the Business for SBA Guaranteed 3rd party financing or Bank Financing or Seller Financing. Buyers want to leverage their money. Sellers want to cash out, any third party funds make the deal a win win for both buyers and sellers. We work with many SBA Banks and we know which Banks will finance certain types of Businesses. This is the Number 2 reasons why most businesses never sell.

3. Use a qualified experienced Business Intermediary to market on a confidential basis and negotiate. Once you have the Price justified, financing in place, a ready willing and able buyer and a meeting of the minds are all that is needed. Have an experienced Business Broker on your side, many deals fall apart several times going from Contract to closing. You need a Broker that has to anticipate the issues and has the knowledge and negotiating skills to “revive” the deal and take it to closing.