William Shakespeare penned “Better three hours too soon than a minute too late” in the second act of The Merry Wives of Windsor. In life and business, an action or decision can have fundamentally different results given the time they occur.
In the purchase or sale of a business, success or failure can be significantly impacted by timing. In the present robust mergers & acquisitions marketplace where multiple offers for sellers to consider are common, a buyer that takes too long to submit a Letter of Intent (LOI) often will either deliver something that is substantially similar to what is already on the table from an equally attractive party negotiating in good faith or enter the negotiations when the seller has already engaged with a party seeking satisfactory middle ground to reach agreement making their offer superfluous.
A thoughtfully drafted LOI in line with market expectations delivered at the appropriate time is necessary for a buyer to successfully reach agreement with a seller. This I believe is self-evident. However, there are other timing elements related to business purchase & sale transactions which may not be obvious. As a professional who has personally sold over 300 privately held companies and family businesses and executively overseen successful completion of 1000’s as the President & CEO of the Pacific Northwest’s oldest & largest business brokerage firm, I want to take this opportunity to share seven timing decisions that can help business owners complete transactions at higher values in more timely sales and buyers stage themselves for success post acquisition.
Best Times to Take a Business to Market
The most important document associated with the sale or purchase of a business is the tax return filed for the most recently completed tax year. The value of this document cannot be understated. In terms of assessment of a company the tax return is the “GOLD STANDARD” because the information it contains is accountable to an outside authority, the Internal Revenue Service, and should be standardized between years. This document will be evaluated by business brokers, buyers, accountants, CFO’s, appraisers, and bankers. It is prudent to go to market soon after this document is filed and to never file an extension in a year when a sale of a business is contemplated. It is not uncommon for buyers and banks to require filing of a tax return before an acquisition will be completed or financed.
The last thing a buyer wants to do after acquiring a company is to have to feed it money. That action can result in a buyer draining needed working capital, taking on more debt, or having to defer necessary investment. This situation can be avoided several ways. It can be addressed through the inclusion of a proper amount of net working capital assets (Inventory, Accounts Receivable, and/or Cash) in a transaction package. It can be addressed through building working capital or a line of credit into an acquisition loan package. It can also be addressed through timing the acquisition correctly. If a business has a seasonality element (e.g., a jewelry business with strong annual sales from Thanksgiving to Valentine’s Day), a business purchase can be timed so two “prime seasons” with strong cash flow occur in the first 18 months post-acquisition. Continuing with the jewelry store example, if a party bought the jewelry store October 1, the buyer would have two strong sales periods in 17 months creating a cash cushion for operation in slower periods. Conversely, if an acquisition was completed March 1, the new owner would only have one strong revenue period in twenty months. It is also prudent to acquire a company immediately prior to an annual strong revenue period because the timing allows for transition training to occur during the most important time period for a business facilitating knowledge transfer when it is most valuable and can be utilized when it is fresh in memory. Selling with strong revenue months on the horizon also commonly results in a seller receiving a premium value for their company and the buyer getting an excellent short term cash on cash return on their business acquisition investment ( https://ibainc.com/blog/gregory-kovsky/potentially-the-most-important-return-on-investment-calculation-when-acquiring-a-business-or-commercial-real-estate/).
Similar to timing an acquisition to a company entering its busiest season of the year, it is important for a buyer to assess where revenue comes from in the business model. If the business operates with customer contracts, the length of the remaining term of the contracts should be assessed. It is likely that a renewal can be more easily obtained and at better terms by a heritage owner than a new owner. Having committed multiple year or evergreen contracts in place can significantly increase the value of a business and make the acquisition more attractive in the marketplace.
If a company operates with a project based business model (e.g., residential home remodeling business). Having a full pipeline of future projects will enhance the value, make it more attractive to buyers, and make it easier to secure financing to support an acquisition. A gap in a pipeline has the potential to have a detrimental impact on price or even kill a transaction.
Proprietary, protected intellectual property frequently increases the value of privately held companies. The longer the remaining term for patents and trademarks commonly the higher the value of the business owning those assets. In the technology world, the highest value paid for software or new technology platforms is shortly after their release. Most buyers are not interested in making the investment or doing the research necessary to take a product from version 2.0 to 3.0.
Timing a Transaction to Mitigate Liability
Often a facility lease liability is the most significant financial commitment made by business ownership. It is common for family business owners to be required to personally guarantee leases for their landlords. They may be willing to guarantee rent payments personally as entrepreneurs. Rarely, are they excited about guaranteeing rent payments personally for a successor in ownership. Property owners (Landlords) have significant leverage when a business is being sold. A buyer will be seeking a long-term lease for continued operation of the business. The seller will seek to end their liability risk at time of sale. If there are multiple years left on a facility lease, a landlord has the right to require the selling owner to remain on the lease as a guarantor as a condition for assigning the lease. This request is not evil in intent, it is simply an effort to mitigate risk for the landlord that the new business owner will not be as successful and perhaps, have trouble paying rent on time. How can a business owner avoid being kept on a lease as a guarantor? They can time the sale to occur in the last year(s) of a lease. In this situation, the horizon scenario facing the landlord is the potential for a vacant space, if the seller moves or closes the business. Now the incentive shifts with the landlord to retaining the tenant and avoiding a vacancy that could result in multiple months without the collection of rent. In this situation, it has been my experience that the landlord will roll out the red carpet for the business buyer and not pursue a personal guarantee by the seller post sale.
Timing a Sale for Financial Clarity and Administrative Ease
Ecclesiastes 3:1-8 says “There is a time for everything, and a season for every activity under the heavens” (https://www.bible.com/bible/111/ECC.3.1-8.NIV). If the objective is to complete a transaction for financial clarity and administrative ease, there are three tiers to consider for timing the purchase & sale of a business. The optimum time to complete a transaction is at 12:01 A.M. on January 1 (If a business operates on a calendar year). The reason for this is in terms of assigning tax responsibility, tying off accounting, and administratively ending one tenure of ownership and starting another nothing is better than the end of an annual tax period. The second most beneficial time to complete a transaction is at the end of quarter, as many taxes, including payroll taxes are quarterly filings. The third best time to complete a transaction is at the end of a month. Many expenses are paid monthly and taxes like sales & use tax in Washington are paid monthly by most companies. Prorating expenses and taxes in the middle of periods is possible, but it is preferential to avoid the activity, when possible.
Business brokers are frequently engaged by entrepreneurs to support business sales and acquisitions because parties seek knowledgeable, experienced, highly skilled guides to help them navigate unfamiliar territory and processes. IBA has successfully sold more businesses than any other firm in the Pacific Northwest. We welcome the opportunity to help business sellers and buyers complete “win-win” transactions employing best practices with superior customer service and integrity. If you are interested in selling or buying a business in 2026, we would welcome the opportunity to learn about your objectives and provide an overview of our professional services.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, legal, accounting, banking, and wealth management communities on subjects relevant to the purchase & sale of privately held companies and family businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.