My goal as a broker is to secure a qualified offer within 60 days. My process always delivers offers, but sometimes closing the deal is another story. Usually, when the right buyer comes along, we work hard to get it closed within 4- 6 months. But I recently had a deal take a full year to complete. Here’s what I learned from that experience:
The timing of the sale of your business matters more than you think. If you’re planning to sell, making decisions early has a big impact on the success of your deal. In this case, the sellers, a married couple, were ready to retire. They considered simply closing the business, but realized, after being referred to us, that they could sell it to help fund their retirement. They were wonderful people to work with: well-organized, motivated, and scrupulous in their business dealings.
We received eight qualified and serious offers within 60 days of the October 2024 listing. I helped them evaluate each one, and they settled on a buyer to negotiate with. But by the time the diligence process got underway, the company’s busy season had started. Every seller struggles with this; they’re running a business, which is a full-time job, and selling the business, which can turn into a part-time job. Responding to inquiries and meetings became very challenging for the owners due to the busy season, causing the process to drag on much longer than it might have. Luckily, we had a motivated and patient buyer who was willing and able to stay the course.
The longer a sale drags on, the more that can go wrong. In addition to dealing with the normal business cycle, we missed some deadlines and had to backtrack and renegotiate several key terms. As time goes on, both the seller and the buyer may experience changes (both personal and financial) that can threaten the deal. Lenders may change their minds about risk profiles or the balance of companies and industries in their lending portfolio. A change in staff at a lender’s or other professional’s office may mean that you have to repeat some of the work or take time to bring someone up to speed.
In our case, the SBA changed its policy on selling a business that requires a license in June of this year. Under the 2025 policy, if the new owner doesn’t have a license, the seller or a licensed key employee must remain involved after the sale to maintain the company’s compliance license. The sellers must also personally guarantee the loan. Because we were well into the process of selling, we were grandfathered in, so my owners didn’t have to guarantee the full loan. But they had to hold a seller’s note and retain partial ownership for two years while the buyer obtained a license. That meant deferring some of their payout and putting a significant part of their future earnings at risk.
What seems like a straightforward deal can get complicated quickly. In our case, the landlord decided to play hardball with the buyer. He started by increasing the proposed rent to an unreasonable amount, which took weeks of negotiation to resolve. (The buyer was able to work something out, but that issue alone could have killed the deal.)
The company also had a large amount in Accounts Receivable (see busy season above) – more than $1 million, which made negotiations more complicated. The seller rightfully wanted to retain the revenue they’d earned as it was collected, but the new owner needed a few months’ worth of working capital to keep the company operating. The lender finally agreed to finance working capital, but they required a Quality of Earnings report to justify the amount. That cost the two parties $ 15,000 (split 50/50 between buyer and seller) and an additional 4-5 weeks of production time while a third party produced it.
Without trust and goodwill between the sellers and the buyer, the deal would never have happened. We made it through to closing in October, and my sellers are finally on their way to a well-earned retirement.
If we can help you find the right buyer for your company, the first step is to get an opinion of value.