How Long Does it Take on Average to Sell a
Business in California?
While most businesses in California sell within four to twelve months, the average is about 6 months. Many factors determine how fast a business is likely to sell including the following:
- Whether the industry is expanding or contracting.
- If the business location is important, is the location improving or declining?
- Is the lease for the premises an advantage or disadvantage given its terms.
- If retail traffic is important, are any changes likely to occur that would materially affect the business location positively or negatively? For example, if you know that an anchor tenant in a shopping center (Nordstroms, Vons, etc.) was going to move out, would it make a difference?
- Will the business provide high paying jobs for family members?
- How stable or volatile is the income of the business? Is the income likely to increase, decrease, or stay the same with a change of ownership?
- Do the business expenses include sufficient funds to pay the owners reasonable compensation for their work? Remember, return on the invested capital should be considered separately from compensation for work performed.
- Do the business expenses include a reasonable, realistic contingency factor?
- Does the buyer own an existing business that will benefit by the acquisition of the business? Will the acquisition generate cross-selling opportunities, cost savings, or other benefits? Will the acquisition eliminate a strong local competitor?
- Does the buyer believe he or she can increase the volume of business in a cost effective manner?
- Is the business located conveniently for the buyer, providing a lifestyle advantage?
- Is the seller willing and able to provide attractive financing to the buyer?
Consequences of Overpricing a Business