How long it takes to sell a company, from the first meeting to the wire transfer

The timeline in a few sentences

For the companies we sell, the average is three to six months from listing to closing. That clock starts after a discovery meeting and the preparation of marketing materials, and it includes due diligence, which usually runs about 30 to 90 days depending on the size of the business. We have closed one sale in eight days and seen another take 18 months, and the difference usually comes down to profitability, how niche the business is and how long it has operated.

I am Michael Rubin, founder of MDR & Associates, and we have been selling Texas companies since 2008. Owners who have never sold a business often imagine a single negotiation followed by a closing. In reality, a sale is a sequence of stages, each with its own purpose and its own risks. Knowing them in advance helps you plan your year, keep the business running well and avoid decisions you cannot undo.

Before the clock starts: the discovery meeting

Every engagement begins with a conversation. In our discovery meeting, which is complimentary and lasts about an hour, a partner listens to the owner's story, the company's value proposition and the owner's goals, reviews the last three years of financials and gives a free low-to-high opinion of value. We also talk about what the owner wants to do after the sale, because an owner without a plan for what comes next often hesitates at the finish line.

This is also when we decide whether we can meet those goals. We only take an engagement when we are confident we can sell the company for maximum value. If the business needs work first, we say so, and the timeline shifts to preparation rather than marketing.

When preparation is needed, it happens before the listing clock starts. Our pre-exit consulting helps owners clean up financials, document owner perks, reduce dependence on the owner and position the company before it goes to market. How long that takes depends on the gaps. Reconciling books can take months; broadening a customer base or building a management team takes longer. If you want to gauge this yourself, the signs that a business is ready to sell includes a short self-test.

Engagement and the marketing package

Once both sides agree to proceed, the owner signs a listing agreement or engagement letter, which gives us the exclusive right to market the company for a set period at an agreed price. Then we gather what we need to build the package that buyers will see.

The confidential package describes the business in detail: a business profile, a financial summary, an organizational chart and industry context. We also produce a video that highlights the company's value drivers. The pace of this stage depends largely on how quickly the owner can provide clean records, which is one reason owners who prepare in advance move faster.

• Three years of financial statements and tax returns, plus current year to date
• Documentation of owner perks and one-time expenses
• An organizational chart and key employee roles
• Customer, product and supplier information

Marketing and buyer screening

The package goes first to our own database of qualified buyers, capital groups and private equity groups. If that does not produce an acceptable offer, we place blind advertisements on the major business-for-sale websites. The aim is the widest exposure in the shortest time without revealing the company's identity. More than half of our listings go under contract before they are ever posted publicly.

No one sees sensitive information without being screened. Each prospective buyer signs a confidentiality agreement and completes a buyer profile that shows whether they are financially qualified. We then answer their questions, which often means gathering more detail on customers, products and financials. This stage is where the timeline varies most, because it depends on how many logical buyers exist for the business and how quickly they engage.

Buyer meetings and letters of intent

When a buyer is seriously considering an offer, we arrange a confidential meeting with the owner at a time that suits the owner. The buyer gets to know the person behind the company and ask questions. Price and terms are not discussed in these meetings; that is kept for the negotiation, so the owner can focus on the business and the relationship.

Then come letters of intent. A principal of our firm communicates the expected price, structure and transition period, and we negotiate with several buyers at the same time, working to avoid the back-and-forth that stalls deals. Every offer is presented to the owner in person. The owner may accept, reject or counter, and we negotiate actively on price, structure and the buyer's fit to carry on the company's legacy. For how to choose the person who runs this stage for you, see questions to ask a business broker before you sign.

Thirty to ninety days of due diligence

Once the owner chooses the best offer and signs a letter of intent, the buyer begins due diligence: requesting documents to verify what the seller has represented about the business. In our experience this typically takes about 30 to 90 days, depending on the size of the company. It is the most demanding stretch for the owner, because requests arrive steadily while the business still has to perform.

Two things keep diligence on track. The first is organized records, so answers are quick and consistent. The second is steady results, because buyers watch the current numbers closely, and a soft month during diligence can reopen a negotiation that seemed settled. Your CPA is a key part of this stage, and so is planning for taxes before the documents are final; I cover the Texas side in the tax and paperwork details of selling a company in Texas.

• Financial statements, tax returns and bank records
• Customer and supplier contracts
• Leases, licenses and permits
• Employee information and benefit plans
• Details on equipment, inventory and any intellectual property

Legal documents and closing day

While diligence runs, M&A attorneys draft the closing documents. We have worked with the same M&A law firms for years, and the owner's own attorney and CPA review everything on the owner's behalf. Negotiation does not end with the letter of intent; the purchase agreement settles the details, such as what the seller represents about the business and what happens if something turns out differently after closing.

This is also when practical transfer items get settled: leases, licenses, vendor accounts, key contracts and the plan for announcing the change to employees and customers. Leaving those to the last week can push a closing date back, so it pays to start on them while diligence is still running.

When the documents are finalized and approved by both sides and their advisors, a closing date is set. Our closings are usually held at our office, with both legal teams present. Ownership transfers, and the seller's proceeds are wired the same day. For what happens next, including the transition period, read how long owners stay on after a sale.

What speeds a sale up, and what drags it out

The fastest sales share a few traits: a profitable company with clean, reconciled books, two to three years of consistent growth, a broad customer base and management that will stay through a transition. The owner is motivated and responsive, and there are several logical buyers. When those conditions line up, the package comes together quickly and buyers move with confidence.

Sales drag out when the opposite is true. Highly specialized businesses have fewer natural buyers. Inconsistent results invite more questions. Financing can slow things down, which is why we help qualified buyers with conventional and SBA financing. And owners who are unsure whether they want to sell create delays at every stage.

Market conditions play a part as well. What buyers pay to borrow and how actively investors are acquiring in your industry both shift from year to year. You cannot control those, but you can control how prepared the company is when it goes to market, and preparation is what lets you move quickly when conditions are good.

• Faster: clean records, steady growth, broad customer base, motivated owner
• Slower: niche industry, uneven results, owner dependence, financing gaps
• Riskiest: results slipping during marketing or diligence

How owners keep the timeline from slipping

The single most useful thing an owner can do is keep running the business as if no sale were happening. Buyers price trailing results, and the months of a sale process are part of that trail. Delegate the sale work so you are not trading operating time for meetings. Answer diligence requests quickly and completely, because unanswered questions breed suspicion.

Keep the sale confidential until the right moment to tell employees, which is usually planned with the buyer near closing. Bring your CPA and attorney in early so they are not reading documents for the first time in the final week. And decide in advance what you will and will not accept on price, structure and your own role, so you can respond to offers quickly.

Starting the clock

If you want to know how long a sale of your company would likely take, the discovery meeting is the place to start. It is complimentary, it takes about an hour at our Frisco office or by phone, and you leave with a free opinion of value and an honest view of the timeline for a business like yours.

We work with owners across Dallas–Fort Worth, Austin, Houston and San Antonio, mostly in manufacturing, distribution, service and construction. Our fee is 100 percent performance-based, so nothing is owed unless a transaction closes.

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