So, you want to know the process of how to buy a business and how long it will take. The actual buying part is easy, the finding, analyzing, and negotiating part is what can take a while.
But to give you an early indication, you should be prepared for months… Warning – This is going to be a long article, so get a drink and a sandwich and get comfortable.
How to Buy a Business – The timeline
Like I said, finding a company that is right for you and that you can actually purchase could take one day if you are lucky – like, very lucky.
More than likely it is going to take you a few months of looking to find that perfect unicorn, four-leaf clover, or anything else mythical. You will never find the “perfect” business, but you can find some good ones.
So, getting back on the topic of how long will it take. Let’s break this down into nice chunks to make it easier to think about. This information is key to understanding how to buy a business. This is a timeline for after you found a business you want to buy:
Step 1: Meet & greet with the business seller
Once you find a company to buy you will want to meet with the seller and their business broker if they have one. You will ask a bunch of questions and find out about the company. Here is a tip – If you sign up for our newsletter below, we will send you a free copy of “80+ QUESTIONS TO ASK A BUSINESS SELLER”.
Expect it to take 1-2 weeks to set up and attend a Seller meeting
Step 2: Getting up to speed
Once you meet with the seller you will want to get up to speed on the industry, competitors, products, and market. Obviously, this is very important, especially if you have not worked in this industry.
Learn as much as you can but you do not need to become an expert during this stage but you do want to master the steps of how to buy a business in your target industry..
Expect it to take 1 week to get up to learn the industry
Step 3: Making an offer (sort of)
Once you found a business, met the seller, and become an instant genius about the industry you should begin to think about making an “offer”. Now I know this may sound scary and like your moving too fast but don’t worry – you can back out of the deal later.
The offer made in this stage will be contingent on reviewing the financials, operations, and other aspects of the business. If it does not look good, you can exit the deal with ease.
Expect it to take 1 week to come up with a price
Step 4: Due diligence of the business
This is where the fun starts. During this stage, you will get the financials, tax returns, bank statements, licenses, customers, and all other items you need to evaluate a company.
Expert Tip -> If you are not comfortable reviewing this, please get a professional to help you.
How long this takes is really dependent on how fast the broker or seller can get it to you. Reviewing this information is very serious and is important to understand the business.
We have written a couple of articles on this topic, just click on the search icon at the top and enter “due diligence”.
Expect it to take 3-4 weeks to do due diligence
Step 5: Final negotiations for the business
Assuming all of the other stages were successful, Congratulations, you are almost there. The final negotiation is sometimes tricky.
If you found any serious problems with the business, this is when you would revise your offer price.
During this time you will also raise these issues (not a full list)
- Drafting, reviewing, and agreeing on the final closing documents
- Defining what if any transition period the seller will work with you once you take over
- Outlining and negotiating any non-compete agreements
- Listing any representations and warranties that the seller has made about the company
- Drafting, reviewing, and agreeing to the purchase and sale agreement
- Setting a closing date and discussing how the business will be paid for
Expect the final negotiations to take 2-3 weeks
Step 6: Closing and paying for the business
Well, congratulations again, you are almost at the finish line. You have found, analyzed, and negotiated your way to buying a business.
To make it short, on the closing day you will sign a bunch of documents that you have already reviewed and agreed to (don’t sign things you have not previously reviewed). You will hand over a check, cash, bitcoin, or your oldest child to pay for the company.
Hopefully, everyone is happy with the deal and it is all smiles and handshakes. You are the proud new owner of your own business and you get to go out there and conquer the world.
Expert Tip -> Don’t be surprised that once you leave and get in your car that reality hits and you are like “jeez, I just bought a business, now what do I do”?
Don’t worry, we wrote an article about taking over a business.
Expect to close within 1-2 weeks (the sooner the better)
Go deeper
People always seem to have a problem getting familiar with the documents involved in buying a business. If this sounds like you, it may be a good idea to buy this book: Here’s The Deal: Everything You Wish a Lawyer Would Tell You About Buying a Small Business. This is a very helpful book to help you with documents, contracts, and other legal issues that may come up when you are trying to learn how to buy a business. It is worth the read.
Final thoughts on buying a business
I told you this was going to be a long one, but I think it was worth it. So, if my math is right, it could take up to 12 weeks plus/minus to buy your business. It could be a few weeks faster if everything is smooth or longer if there are bumps along the road.
Hang in there, if it is meant to be and this is the right business for you, you will get to the finish line. Trust me, it will be worth it in the end.
If you see something in this how to buy a business article and don’t know what it means, you can always search for it at the top of the page, there is a good chance we wrote something about it.
Now, go out there and change your future.
