Frequently Asked Questions

We get asked alot of questions by business owners interested in learning more about the process of selling a business. Business brokerage and M&A advisory is an industry that most folks are not familiar with. With that mind, we have put together a list of the top 6 questions we hear most often. The answers are drawn from our own experience and from a 2013 industry study by Pepperdine University’s Graziadio School of Business and the International Business Brokers Association.

How long does it take to sell a company?

On average it takes six to nine months to close the sale of a business. The time it takes to close a transaction is significantly impacted by how prepared the company is for sale. 

Why are businesses sold?

Owner retirement is the overwhelming reason a business is put on the market. Burnout is the second most commonly cited reason for sale, followed by owner’s health, and unsolicited offers.

What are companies selling for?

Apx 75% of companies valued under $5 million sell for between three and five times their EBITDA, while 82% of companies valued at $5 - $50 million sell for between four and six times their EBITDA. Contact us if you would like to know sale multiples specific to your industry. 

Where are buyers located?

Over 50% of companies valued at $2-$5 million are sold to buyers located more than 80 KM away. Over 90% of companies valued at $5-$50 million are sold to buyers located more than 80 KM away. This underscores how important it is to adjust your efforts of looking for buyers based on the size of your company. Based on the data, if you’re a seller in the $5 million to $50 million sector, you have only a 10% chance of finding a buyer locally.

What are the profiles of typical buyers?

For companies valued at $1-2 million, 73% are bought by individuals, and 18% are bought by another company. For companies valued at $2-$5 million, 47% are bought by individuals, and 41% are bought by another company. For companies valued at $5-$50 million, 60% are bought by private equity groups, and 35% are bought by another company. These statistics represent the overall private company sale market and may not be accurate for specific industries and companies. For example, private equity groups may be more active buying certain types of companies valued in the $2 to $5 million dollar range than the data suggests.

How do you find buyers?

Existing companies, also referred to as strategic buyers, are found through a research-intensive search and by drawing from proprietary industry databases. Private equity groups—which often specialize in buying companies of a specific size and industry focus—have relationships with professionals that represent companies for sale. Individual buyers are best found through relationships with accountants, lawyers, and wealth managers. Some transactional firms like Greywood build databases of qualified individual buyers who have previously expressed an interest in buying a specific type and size of company. There are, of course, various websites that list companies for sale. But the downside to using these is that they breach confidentiality, advertising to the world that a company is for sale, risking relationships with suppliers and customers, and potentially allowing competitors to see a company’s sensitive information.

Have a question about selling your business or the exit process? Don’t hesitate to contact us, we are happy to provide a quick answer to any of your questions.