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12 Month Listing Period

Why A 12 Month Listing Period Is Necessary In Business Sales

Some business owners are a little shocked when they first hear that business brokers typically work on a 12-month listing agreement. After all, most people have never sold a business before, and many sellers assume that the process of selling a business is similar to selling a home. While there are a few similarities between the two processes, business sales and real estate sales couldn’t be more different. A 6-month listing agreement that is commonplace in real estate sales just wouldn’t work in the world of business sales. Most business listing agreements will be 12 months long, and brokerages like Green & Co. simply can’t take on a listing for a shorter period of time: let us explain why. 


Average Days on Market

For many years now, the average number of days that a business spends on the open market has been right around the 280-day mark. In fact, for businesses sold in 2019, the average days on market was 265, which means we had a really good year in business sales, since we were actually below our historical average. However, as you can imagine, the numbers changed in 2020, largely due to the slowdown of SBA financing as the SBA was also dealing with PPP loans at the same time, and the average days on market shot up to 314. That puts us at an average for the past two years of 289.5 days or about 9.5 months. So, because historically it has taken businesses 9-10 months on average to sell, a 6-month listing agreement is pretty pointless, as 6 months doesn’t even give us the chance to sell it. A 12-month listing agreement gives us the very best chance to get it sold. 


We Deserve a Chance to Sell It

As business brokers, we work on a contingent basis. That means we don’t get paid until your business sells. So, everything we do, from the moment you send us your financial documents and we begin working on your business’s valuation to helping everything get scheduled for your closing day, all of the hours we put in for 9-10 months of working on your listing is done at our own expense, and we don’t get paid for any of the work we do until the job is done. Furthermore, the brokerage starts spending real money on day one, as soon as your listing agreement is signed. We initially spend thousands of dollars on creating the marketing package for a listing, and then we incur regular advertising costs for all of the places that we market the business for sale. We are taking on all of the cost and risk, in order to give the business the best chance to sell. Because of that, we deserve the chance to sell it, and a 12-month listing agreement gives us that opportunity. 


Why Take a Bet If You Can’t Win?

Because we, as business brokers, spend our time and money on the listings we take, we want to make sure that we are only taking the listings that we believe will sell. We are taking a risk and betting on every listing we work on. So, if we are presented with a seller who only wants to list their business for 6 months, then based on the average numbers, the odds are that the business won’t sell in that six month period. If we know that it takes 9-10 months on average to sell a business, then if we take that listing for only 6 months, we are placing a bet that we just can’t win. We at Green & Co. have a sales success rate that is more than triple the average, and in order to be successful in selling a new listing we take, we need to put all our tools to work to sell it. It is estimated that only about 25% of the businesses that are listed on the market will sell, so we are already working with the odds against us. In order for us to do everything we can to get your business sold, we need the time to get the job done right. That’s why a 12-month listing agreement is necessary, because it gives us the very best shot at achieving our common goal: getting your business sold.