Buying a business is not easy. The amount of time it takes is not set. There are a vast array of factors that will come into play and affect how long this process takes.
In this article, we are going to go over everything you need to know about how long it takes to buy an existing business.
So, without further ado, let’s dive right in and get started!
How Do You Know What Business is the Best to Buy?
If you have spoken to a range of business buyers, you will know that people that have a clear idea of exactly what business they are aiming for will be most successful.
In our opinion, it is essential that you do not heedlessly dive in and purchase any business that crops up. On the flip side, you also need to be aware that the perfect business does not exist.
Any business you go for will have pros and cons. Your job as an investor is to make sure that the pros outweigh the cons for you. A company that can run itself will be less risky and make it so that you are a perennial buyer.
Take time to consider the business you want to buy and what industries will interest you and suit your needs.
What is the Process of Buying a Business Like?
There is a clear process that you will go through as someone that is going to purchase a business. The overall process of buying a business should take between ninety and one hundred and twenty days. As long as you have gone under contract.
The general process is something like this:
- Letter of Intent – 1–14 Days
- Due Diligence – 60–120 Days
- Financing – 60–120 Days
- Licensing – 60–120 Days
- Closing Preparation – 60–120 Days
- Closing – 30–365 Days
- Training – 30–365 Days
Bear in mind that things can take longer or shorter depending on a range of factors.
What can Affect the Timeline of Buying a Business?
There are a lot of things that can impact how quickly or slowly a business can be sold. In this section, we are going to take a look at four of the main things that can affect how quickly a business can be purchased.
What kind of Buyer Are You?
The first thing we need to note is that there are three main types of buyers. We have listed these categories down below:
- Private Equity Groups – A business in this category will be a group that solicits funding to gain companies and generate returns for their investors.
- Individual Buyers – A person that falls into this category is made up of one or two people that have the aim to buy their first or second business.
- Strategic Buyers – People in this category are essentially businesses in the same industry that are looking to purchase a company that compliments the business that they already own. Usually, this will increase their market share, geographical reach, or product mix.
Most often, individual buyers will take the longest to get financing. But they may also have shorter due diligence periods.
Strategic buyers and private equity groups on the other hand will have more time in due diligence, but will not need as much time to secure financing for the purchase.
What Kind of Business Are You Buying?
What industry you are looking for can affect whether you need a license or a specialized certificate to close the deal. For example, for business that involves pest control might need licensing as follows:
- A degree or certification in the field
- Passing a standardized test
- Several years of direct experience in the industry
- Completion of a training program
If you are a buyer, it is essential that you consider the licensing that you require before you purchase a business. What you will need to get licensing or certification can vary greatly. On top of that, it might take longer than you think to get the right certification for the business you intend to purchase.
Do You Have Experience in Purchasing Businesses?
If you are familiar with the process of purchasing a business, you will have an edge over those that are not. Experience in how buying a business works can mean that you will process and work through everything quickly.
On top of that, people that have not bought a business before will have longer due diligence check periods.
Hopefully, you have enjoyed reading this article and learning about how long it takes to buy an existing business. If you have a questions to ask, make sure to check out the link. They cover a broad range of information that will you might need if you want to purchase an existing business.