I had a conversation with another business broker the other day that I found to be a bit odd. He told me that the longest he will do a listing agreement is 90 days, and that he believes that any good business that is priced appropriately will sell within that time frame. I suspect that when he said “priced appropriately” it is code for priced at an average to below average price and usually with generous seller carried financing.
I believe that 90 days is an unrealistic time frame for selling a business, and it is at odds with doing what is right for your client. Consider this: In Portland, the average marketing time for a house right now is more than 150 days. Even in a strong economy, the average marketing time for a house is usually between 60 and 90 days. Businesses are far more complex and appeal to a much narrower market than a house does, so it is difficult to imagine how anyone would think that a 90-day listing is appropriate for a business. I’ve seen different business broker surveys/studies that indicate that the average marketing time for a small business ranges from about 6.5 months to 9 months.
As a business broker at Codiligent, it is my goal to work with sellers to determine an appropriate pricing strategy that is based on their goals and timeline. Consequently, I do a very thorough analysis up-front to determine a realistic range of value for a business. I then discuss that range with my client along with their goals, expected time frame, and appetite for risk. We then determine an appropriate pricing strategy that is consistent with their goals. For example, one client may be anxious to sell their business quickly, and is less concerned about the price and terms. That client may decide to price the business on the low end of the range of value and offer generous seller carried financing. Another client may not be in a hurry to sell, but may want the best possible price without carrying any financing. For that client, a price that is at the upper end of the realistic value range may be appropriate but with the expectation that it may take far longer to locate a buyer who is willing and able to pay for the business without seller financing. My listing agreements are for eight months and I am happy to extend them if in eight months the business has not sold.
Someone who has spent years building a business deserves a broker who will devote the time necessary for a successful sale at a price and terms that meet their goals, not an impatient broker looking for deal churn. For many business owners, a business sale is a once-in-a-lifetime event: choose representation wisely.
