November 04, 2019
At BizON, we have thousands of sellers who ask thought provoking questions like: When is the best time of year to sell a business? This is a valid question. The spring and summer months seem to be the prime seasons to sell a house, but is the business for sale landscape similar to the residential real estate landscape? Let’s dig in…
First, we need to address the most popular inquiry – how long it actually takes to sell a business. The typical answer, especially in the micro market (defined as businesses selling from $1,000 to no more than $5,000,000) is anywhere from 3 to 8 months. But the truth is, it really depends on the business as every deal is unique based on size, organization, readiness to sell and transition. Now, there are some articles that cover “The right time to sell a business”. The standard answer to this question is “purchase price can be maximized when all personal, business and industry factors align”. Our CEO, Nunzio Presta, likes to attach his S.E.T model to this answer as well. The right time to buy is when social, economic and tech trends align with the opportunity, and the right time to sell is A) When you are ready and B) When you have built a business that is self-sufficient, with a recurring business model and timing is on your side. With this as the foundation, let’s analyze the best time of year to sell a business.
Let’s start by breaking down the sale of the business into four distinct phases: preparation, marketing, buyer selection and closing. BizON is part of the marketing phase and we know that our average listing takes about 3-4 months to find a buyer – so, let’s be conservative and call it 4 months. This means we can allocate 3 months to the preparation and buyer selection phases, and lastly, allocate 2 months to the closing phase. Knowing these timelines, we can work backwards to figure out the optimal timing for each phase.
Based on our experience connecting over $2billion in business and franchise listings, we’ve seen that the best time to start the marketing phase is in September because that is when buyers are back from summer holidays, refreshed and ready to find new opportunities. This doesn’t mean other months are a lost cause; this is just the optimal time. We’ve seen extremely successful connections occur throughout the calendar year and we’ve also noticed that compared to the mid-market and larger M&A scene, the micro market as defined above is always active and hot, as people are constantly looking for lifestyle businesses where they are able to be their own boss. Nevertheless, we can assume that a seller doesn’t want to be entering the closing phase over the summer months due to holidays of key members of their acquisition team (accountant, lawyer and banker) that can delay the process. Of course, the other consideration to account for is holiday celebrations in the month of December. If you can time the buyer selection phase over these months, the seller will have the opportunity to reflect on the process and alternatives that have been presented during the marketing phase.
With that said, the best month to start preparing for the sale of your business is June, with aggressive marketing proceeding in September. Here is a graphical representation of the activities and best timing for each phase of the sale process:
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Opinions expressed here by Contributors are their own.