Buying or Selling a Business: What to Expect and How Long It Takes

Most owners buy or sell a business only once. The professionals around the table may have handled dozens of deals, and they often use shorthand that makes the process seem more mysterious than it is. That information gap can put you at a disadvantage. The best place to start closing that gap is to understand the process: what happens, when it happens, and how long each stage usually takes.

Every deal is different. A $100,000 asset sale of a local landscaping company will usually move faster than a $1,000,000 medical practice involving licenses, payer contracts, and a landlord who takes three weeks to return a call. The sequence, however, is generally the same. This article begins after a potential transaction has emerged; it does not cover preparing a business for sale, identifying prospective buyers or sellers, or evaluating whether a particular opportunity is the right fit. In a home-sale analogy, it starts when someone is preparing or responding to an offer—not when the owner lists the property or the buyer begins the search.

The Short Answer on Timing:  2 to 4 months from LOI to Closing.

For a typical small business with only a few equity owners, plan on two to four months from "okay, I think we have a potential deal" to money in the bank.

These ranges are planning estimates, not promises. The structure of the business, the time it takes to negotiate a letter of intent, the buyer's financing, required approvals, and the condition of the records can materially change the timeline. If your deal involves financing, professional licenses, real estate, or several owners who need to agree on things, assume you're at the longer end of those ranges.

Step 1: The Letter of Intent – the “LOI”.  7 to 21 days.

You've got a willing buyer. Or you've found a seller that is interested in your offer. Time for the LOI.

Most provisions in an LOI are nonbinding, but the document still shapes the rest of the transaction. It establishes the commercial framework, records the parties' expectations, and often gives the buyer an exclusivity period. Terms left vague at this stage are usually harder to resolve later, after the parties have invested more time and the seller may have less leverage.

A good LOI covers:

·         The price, and how it gets paid - cash at closing, seller note, earnout, rollover equity

·         Asset or equity deal, and how the price is allocated.

·         What's in, what's out, and how working capital gets handled

·         Escrow or holdback - how much and for how long

·         What happens to existing debt and your personal guarantees

·         Whether the seller is staying on to help with the transition, in what role, and for how long

·         Non-compete and non-solicit expectations

·         Exclusivity, the diligence window, and a target closing date

·         Which provisions are actually binding - usually confidentiality, exclusivity, and expenses

In my experience, it is better to resolve the difficult economic terms early, including earnout mechanics, the working capital target, escrow, and indemnification caps. Writing “to be negotiated” may keep discussions moving in the short term, but it usually makes the definitive agreement harder to negotiate later.

Step 2: Due Diligence. 30 to 60 days.

This is when the buyer verifies everything. Financials and taxes, contracts, employment and benefits, intellectual property, litigation, licenses and permits, insurance, real estate, regulatory compliance. In healthcare or tech deals, add privacy and data security to the list.

If you're selling: build an organized data room and disclose completely. A known problem is usually easier to price and address than one the buyer uncovers late. Late discovery can lead to a price reduction, a larger escrow, additional closing conditions, or a special indemnity focused on that issue. Careful pre-sale preparation can reduce those risks.

If you're buying: diligence isn't only about confirming the price. It helps determine which representations and covenants you need, what must be fixed before closing, and whether any liabilities could follow the acquired assets by law despite the allocation stated in the purchase agreement.

Step 3: The Purchase Agreement. 30 to 45 days (overlaps due diligence).

Drafting usually starts immediately after the LOI while due diligence is in the works. The stack of documents typically includes:

·         The purchase agreement itself—an asset purchase agreement, stock purchase agreement, or membership interest purchase agreement. You may hear it called the definitive agreement, an APA, an SPA, or a MIPA, depending on the transaction structure. This is the document that controls the transaction and becomes the law between the parties.

·         Disclosure schedules — the detailed exceptions to the seller's representations, and usually the most time-consuming item on this list.

·         Bill of sale (used as proof that assets changed hands), assignment and assumption agreement, IP assignments

·         Escrow agreement

·         Promissory note and security agreement, if you're carrying paper

·         Employment, consulting, or transition services agreements

·         Non-compete and non-solicit agreements

·         Landlord consent, lease assignment, and other third-party consents

·         Corporate authorizations — the consents and resolutions proving you can actually do this

The most heavily negotiated provisions allocate responsibility for losses discovered after closing. They include representations and warranties, knowledge and materiality qualifiers, survival periods, indemnification caps and baskets, escrow terms, and the working capital adjustment. Those terms operate as a single system, and together they decide who pays for the problem nobody saw coming.

Step 4: Financing, Consents, and the Clocks You Don't Control. 30 to 90 days.

Several important steps depend on third parties, and delays in those steps often extend the closing timeline. These steps run in parallel with due diligence and drafting the purchase agreement.

Buyer financing. SBA 7(a) loans are everywhere in this market, and they add real time: underwriting, appraisals, and lender terms that can reshape your deal, including limits on seller notes and guarantees the lender expects you to sign.

Third-party consents. A third-party consent is required when someone outside the buyer and seller has approval rights over part of the transaction. For example, a landlord may need to consent to the assignment of a lease, or a key customer agreement may require consent following a change of control. Other common consent parties include franchisors and lenders. These approvals can take substantial time, so identify them early.

Licenses and permits. Sellers that hold professional, healthcare, liquor, or contractor's licenses have to deal with license and permit transitions. Some of these are measured in months, not weeks.

Lien releases and payoffs. Every secured party needs to give a payoff number and agree to release at closing.

Insurance and payroll. The buyer has to be able to cover the business and pay people on day one.

Step 5: Closing.  1 to 5 days.

Today, most closings are handled electronically. If the parties and their advisers have prepared well, the final exchange should be orderly: signatures are collected and held, funds are wired, and counsel confirms that each closing condition has been satisfied or waived before the documents and funds are released.

Don't forget the unglamorous stuff: prorating rent, utilities, and payroll, counting inventory, reading meters, handing over keys, domains, accounts, and passwords, and making sure the employee announcement happens exactly the way you planned it.

Step 6: After the Wire Clears

You're almost done – but not completely.

·         Working capital true-up. If working capital was involved in the deal, there will be a post-closing statement. That statement usually lands within 60 to 90 days, then somebody writes a check. More on this in another post.

·         Transition. Whatever support the seller promised - 30 days, six months, whatever the agreement says.

·         Filings and notices. Depending on the transaction structure, the parties may need to address name changes, tax registrations, assumed-name filings, licenses, final returns, and notices to customers, vendors, and government agencies.

·         Escrow and survival. If the parties use an escrow, the release schedule is negotiated and may extend for a year or longer. Representation survival periods also vary; fundamental and tax representations often survive longer than general business representations.

·         Earnouts. If there's an earnout, somebody must track and report it. Vague earnout language is a frequent source of post-closing litigation.

Common Causes of Delay or Breakdown

The following issues frequently delay a transaction, reduce the purchase price, or cause the deal to fail:

1.       Financials that don't hold up under scrutiny

2.      Landlords that aren't engaged in the process in a timely manner or who don't understand the deal

3.      Financing falling apart or getting repriced late

4.      Undisclosed liabilities surfacing in diligence, followed by renegotiations that don't go well

5.       Ownership or authority problems — a missing assignment, an incomplete or inaccurate cap table, a member who never actually signed

6.      Cold feet. At some point the process starts to get real. A seller is moving on from something they may have loved. A buyer is spending a lot of money and stepping into the unknown. It happens.

Many of these are fixable ahead of time. Nearly all of them are cheaper to handle before a buyer is in the room.

One Piece of Advice

Despite my deep personal interest in generating legal fees, I don't like people wasting money on lawyers when they can do the work themselves. But before you sign an LOI, I strongly recommend spending a few hundred dollars to have a lawyer review it. You may be able to avoid that expense if you are working with an experienced broker who regularly negotiates LOIs. Even then, legal review is worthwhile because the LOI is the point at which structure, risk, and timing are still on the table. After that, you are negotiating against expectations you have already set.

Eldredge Law Group advises small-business owners, closely held companies, and buyers in Virginia and across the United States on business sales and acquisitions, including pre-sale preparation, letters of intent, due diligence, purchase agreements, and closing. If a transaction may be on your horizon, early planning can help identify and address problems before negotiations begin.

This article provides general information about business sales and acquisitions. It is not legal advice and does not create an attorney-client relationship. Every transaction depends on its particular facts, governing law, and negotiated terms. Consult qualified counsel regarding your specific circumstances.