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Novation Cycle Timeline
The Core Question: How Long Until I Get Paid?
In the world of novations, time is money. A common point of confusion for investors, both new and experienced, is the timeline. The question isn't if you'll get paid, but when.
"How long does it normally take, the cash conversion cycle for the novation? 60, 90 days?"
Let's break it down, so you understand the timeline.
Two Ways to Measure the Clock
First, you need to know when the clock actually starts. The cash conversion cycle can be measured from two different starting points and confusing them will wreck your projections.
1.From Lead Inception: This measures the time from the very first contact with a potential seller until the deal is funded and you have cash in hand. This metric is highly variable because lead nurture can take days, weeks, or even months.
2.From Contract Execution (The Only Metric That Matters for Projections): This measures the time from the moment you get the novation agreement signed by the seller to when the deal is funded. This is the most reliable metric for forecasting your revenue.
Pro Tip: While tracking "Lead to Close" is useful for analyzing your marketing effectiveness, you should use "Contract to Close" for managing your operational pipeline and cash flow expectations.
The 40 to 60-Day Battleground
Based on real-world data, the typical timeline for a novation deal, from a signed contract to a funded deal, is 40 to 60 days.
Best Case Scenario (Rare):
Under 30 days. According to Shawn, this is highly unusual. Do not build your business model around this expectation. If a deal closes this fast, consider it a win, but not the norm.
The Sweet Spot:
40 to 60 days. This is where most deals will land. It accounts for the necessary steps: finding an end buyer, navigating their financing, and completing the title work and closing procedures.
The Long Haul:
Over 60 days. This is also a realistic possibility. Delays can and do happen. This is often due to factors entirely outside your control, such as local market conditions ("Days on Market") or buyer financing issues.
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Why The Variability? The Market Is King
You cannot apply a one-size-fits-all timeline to every deal. A property in a hot seller's market in one city might get snapped up in a week, while a similar property in a slower market across the country could sit for 45 days before you even find a buyer.
Weaponizing Your Contract: The Automatic Extension Clause
Because deals can easily push past the 60-day mark, you must have a defensive mechanism built into your novation agreement. Waiting for a seller's permission to extend a contract is a position of weakness.
The Solution: An automatic extension clause.
Shawn highlights this as a critical component of their agreement. This clause grants you the unilateral right to extend the contract term based on certain pre-defined parameters.
Action Item: Review your novation agreement immediately. If you do not have a clear, enforceable automatic extension clause, consult with an attorney to add one. This is non-negotiable for doing novations effectively at scale.
Novations work when you have the right leads—Prexium brings them straight to yo. Start today 👉
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