How Long Does it Take to Sell Your Propane Business
This is a question that we are often asked by clients. The answer depends on the company and how well prepared they are for the sale process. We thought it would be helpful to go back and look over the last several transactions we completed to see exactly how long it took to close and why. The quickest transaction took just 11 weeks from engaging us to assist them until the closing date and the longest took 36 weeks. The average was 22 weeks.
Most owners we speak with tell us they think the process will take six to twelve weeks for a basic home energy company without a property sale. If everything runs perfectly they are not too far off in their estimates.
The number one area where business owners tend to underestimate the time it takes to close a transaction is in gathering the information a prospective purchaser needs to value the business. Most buyers want to get a good handle on the historical financial results and that’s not just gallons and margins. In addition, a clear understanding of the assets being sold needs to be identified. The number of propane tanks and their age, truck information, and current computer system software are just the start of what most buyers will want to know before making an initial offer.
Sellers Operating Expenses
Understanding the seller’s operating expenses is also a major focus for most buyers. While buyers will have a unique and different set of expenses, they will want to understand many expense items such as staffing, benefits, rents, vehicle repairs, fuel and advertising costs to name a few. A seller who has all the information laid out clearly will shorten the time it takes to sell their business.
Buyers Operating Expenses
The buyer also needs some time to learn about the employees and what their specific job functions and strengths are so they can transition the company smoothly for both the buyer and seller as well as for the customers and employees. The smoothest and quickest transactions are the ones where there are no surprises uncovered in the due diligence process.
When property is involved, a recent appraisal and current environmental report will shorten the closing cycle. It is possible to sell the business and later close on the property however most buyers and sellers prefer to close both at once.
Timeline to Sell A Propane Business
Another note on timing revolves around summer vacations. In our industry as well as dealing with anyone who has school age children, the summer is a big vacation time and it is often more difficult to coordinate meetings.
As I have mentioned earlier, time tables can vary by company depending on business complexity, property and time of year. The following chart may help to better understand time lines.
Tips to Sell A Propane Business
Here are some helpful hints for anyone considering the sale of their business:
- Get together with your accountant and prepare a fairly detailed income statement in addition to your financial statement.
- Prepare all financial information in Microsoft Excel. Almost all operating software and accounting software upgraded in the last ten years will have the ability to export reports into Excel.
- Have recent (within the last 2 years) property appraisals and environmental reports (phase 1 and or phase 2) available for a rental or sale of property.
- Start the process in January, February or March to avoid summer delays as well as avoiding the last quarter scramble to close the transaction before the heating season or the end of the year.
- Seek help from your accountant, financial advisor or other professional who has transaction experience. You will be glad you did!