A lot of business owners would like to know how they can sell their businesses while also making as much profit from the sales as possible. Most people think that selling their business is a very complicated process and as such, they feel that they need the services of a broker. However, there is one problem. When you hire someone to sell your business, you will have to pay them a large percentage of the sale in the form of a commission fee, and this will have a big impact on the amount of money you will take home at the end of the day. There are ways for you to sell a business yourself and cut out the middle man or anyone else who wants to profit from the sale of your business.

Brokers sell businesses because of the commission they earn. They have no form of emotional attachment to the business in the way the owner would have. This means they might not put as much time and energy towards trying to market and sell the business as you would like them to. It is also very possible to list your business on the markets for months or sometimes even years without actually selling it out because the broker isn’t trying hard enough. Now you might think that you could find a buyer yourself if this were the case, but there’s just one problem. When you sign a contract with a broker to have them sell your company, you are giving them permission to be the only ones who can manage the sale of your business. What this means is that even if you were to find a buyer yourself after you have signed a contract with a broker, you would still be legally obligated to have the broker handle the transaction.

One of the best ways to sell a business privately is by selling it online. It is quite easy and will help ensure that only you reap the benefits from selling your business and not some commission happy broker.

Advertising your business for sale is quite easy too. The internet has made it easy for business owners to find buyers with the kind of money it takes to purchase a company. Some popular websites where you can find buyers include Businessesforsale.com, Bizquest.com and bizbuysell.com. Most brokers will still make use of these websites to sell your business anyway so you might as well cut them off and do the marketing yourself. These websites are not brokers, but rather advertising services for business owners. You will be expected to pay a listing fee when you put your business up for sale. These fees are typically a fixed price that is nowhere near as much as what a broker would charge you. On the listing page, there is a contact form that potential buyers can fill out to send the owner an email message. This is how communication gets established between owners and buyers. From there, they can negotiate the deal and pursue a purchase transaction if an agreement is made.

Tips For Selling Your Business Without a Broker

1. Delays Kills Deals

Punctuality is the soul of business and unnecessary delays on the part of the seller can go a long way to kill a deal. Make sure that you prepare ahead of time and collect your financials, tax returns, leases, et al. You should not keep your buyer waiting on you to produce this stuff. If you should hire the services of a broker, the would make sure that before you put your company in the market you would be perfectly ready and as such you should emulate them. Try to put yourself in the shoes of the buyer: What would they want to see in order to analyze the business? Three to five years of financials are commonly presented to buyers. This means profit and loss statements as well as balance sheets if you have them. If your CPA produces statements, then use these. If not, you may need to use your tax return if your financials are not clear and correct. The very detailed documents like bank statements can wait for the due diligence period after a deal is agreed to but before it is final.

2. Market Small Businesses on the Web

Most businesses make use of the internet to market what they have to offer, so you should too. Make your research and find out the website where you can list your business without having to pay a commission when the businesses finally sold.

Note that businesses above around $3 to $5 million in sales can benefit from a marketing campaign (direct mail, telemarketing, and focused direct calling) that can attract more buyers, and thus a higher price.

3. Manage the Process

Finding buyers is a difficult process and managing them is even a lot more difficult. Don’t be afraid to vet the buyer by asking them for a personal financial statement (a broker would do this for you, so you should do it too). It makes no sense to waste your time with a buyer who doesn’t even have the wherewithal to buy your business in the first place. You should also ask them to sign a non-disclosure agreement.

As soon as you find someone who is interested in your business you should keep the process moving and not delay things. Provide information, set up meetings, negotiate and keep trying to move them towards an offer.

4. Keep on it Through Due Diligence

Always bear in mind that you do not need to disclose everything before an offer and offer acceptance. Tell the buyer they will have time for checking the books, and if anything is amiss they can back out. You can even hold back on proprietary information that could be damaging if disclosed too soon. For instance, a customer list or key to a manufacturing process. A prospective buyer may wish a report that includes sales by customer, and this is a very reasonable request so they can see that your sales are not concentrated in a few accounts. You may be concerned that the buyer may steal customers from you especially if the buyer is into a similar business as yourself. The solution is to print the report and redact the actual names of the customers. However, you should not hide any negative information from the potential buyer. Try to give the potential buyer all the necessary information before they make the offer. There is hardly ever a perfect business so negative information is not totally unexpected.

5. Use an Attorney

You can find business sales contracts, non-compete agreements, et al. online, however, you will still need the services of an attorney so as not to make any unforeseen mistakes. Some attorneys see business acquisitions as payday, so if the transaction is tight on money you really need to pay attention in that area. Brokers typically have accountants and attorneys on their payroll who do these tasks for their clients. But since you are not using a broker, you’ll have to go and hire them yourself. Don’t worry because attorneys and accountants typically have fixed fees for tasks like these. Even though some charge by the hour, it won’t take much time for them if they’re just calculating taxes or creating documents. The only scenario where it would cost more money is if you had the attorney do the negotiating for you. But, you can handle that aspect of the deal yourself. Just let the attorney know what you want and what you expect out of the transaction. Then they’ll create the contracts and agreements in accordance with the information that you provide them. Remember that your attorney works for you, and you make the decisions.

In conclusion, selling a business without a broker can be done, but be aware that statistically more un-brokered deals fall apart than those managed by a broker. Another option, if you already have found a buyer, is to negotiate with a broker for their services in managing and structuring the deal.

Frequently Asked Questions

1. How Do You Sell Your Business Without A Broker?

Here are some guidelines on how to market your business directly without the help of a broker;

  • Avoid delays
  • Set your price
  • Deal with the buyer
  • Market your business
  • Get accountants and attorneys
  1. Can You Sell Your Own Business Without A Broker, Privately?

Yes, you can offer and sell your small business without a broker. Of course, you are not tied into a broker, so there is no penalty if you do change your mind and take your business off the market.

  1. How Do You Find A Buyer For A Small Business Without A Broker?

Some notable websites you can find buyers on include ExitAdviser.com, Businessesforsale.com, Bizquest.com, and Bizbuysell.com.

4. What Is The Best Time To Sell A Business?

The perfect time to sell is when your company has a consistent history of growth, with a relatively large growing trend in the recent year.

  1. How Do You Sell Your Business On Your Own?

Here are some tips on how to sell your business by yourself;

  • Market your business
  • Work out an exit strategy
  • Put your business on the market
  • Sort out all accounting records
  • Respect the due diligence process
  • Hire a valuation expert and find out your business worth
  • Sift through prospective buyers: Find the Perfect business owner
  1. Why Should You Avoid Selling A Small Business With A Broker?

These are some reasons for avoiding selling a small business with a broker;

  • Pricing
  • Lack of planning
  • Choosing the wrong buyer
  • Not using the right representation
  • Not having clean due diligence documents
  1. Who Do You Talk To About Selling Your Business?

You can talk your business sales over with your broker.

  1. How Do You Sell Your Small Business With A Broker?

The following are the tips to sell your business with a broker;

  • Determine your business valuation
  • Get your financials in order
  • Hire a business broker
  • Finalize legal documents and contracts
  1. How Do You Get Rid Of A Small Business?
  • Decide to close
  • Maintain records
  • File dissolution documents
  • Resolve financial obligations
  • Comply with employment and labor laws
  • Cancel registrations, permits, licenses, and business names
  1. Do You Have To Have A Broker To Sell A Business?

Some founders hire business brokers, while others can successfully sell the business without involving brokers.

11. What Is The Normal Commission For Selling A Business?

Though the fee to sell a company depends on the business being sold, in general terms, the commission will be anywhere from 8 to 12% of the total sales price paid at closing.

12. Why Do Business Brokers Sell Your Business?

Business brokers attract more potential buyers. A business broker can also help present your company in the best light to maximize the sale price.

13. Should You Use A Business Broker When Purchasing A Small Business?

Oh yes! Having a good business broker by your side is important because they will help you negotiate the best deal possible for the business. Once you find a small business available for sale that’s the perfect fit for you, you’ll enter a complicated negotiation process.

14. Can A Wholesaler Sell To A Broker And The Broker Sells It To A Private Individual?

Yes!

15. Who Pays Closing Costs When Selling A Business?

It is the seller who usually pays closing cost that ranges between 8% and 10% of the sale price.

16. What Should I Expect From A Business Broker?

Here are some qualities you should expect from a business broker;

  • Check a potential broker’s credentials, track record, and client references
  • Look for a broker who listens to your needs and prioritizes your interests
  • Find a broker with a solid sales strategy and confidentiality plan
17. How Do You Avoid Capital Gains Tax When Selling A Business?

You can put your company in a tax-free jurisdiction and your home country won’t tax your capital gains. At least you can choose to put your offshore company in a place where they may be taxable income but they don’t tax capital gains.

18. How Much Does It Cost To Sell A Small Business?

The likely selling price of a small business with an annual cash flow of $200,000 will be between $400,000 and $600,000.

19. How Long Does It Take To Sell A Small Business?

Typically, it takes around 6 to 11 months on average to sell your business.

20. As A Business Buyer What Questions Should I Ask The Seller?
  • Why are you selling?
  • How would you grow the company?
  • What outcomes are you looking for?
  • How have you arrived at the asking price?
  • Who are your key customers, suppliers, and staff?
  • Are you willing to agree to a non-competition clause?
21. What Are Some Possible Reasons Why Your Broker Didn’t Sell Your Business?

Here are some possible reasons why your broker didn’t sell your business;

  • An inexperienced broker
  • Not properly advertised
  • The businesses curb appeal
  • The previous broker did not co-broke
  • Incomplete books and proper record
22. How Do You Find People To Buy Your Business?

The following are some strategies you need to find people to buy your business;

  • Make connections
  • Keep them updated
  • Build relationships
  • Hire a banker or broker
  • Know what acquirers want
  • Build and plan to be acquired
  • Begin the day you found your company
  • Just focus on building a brilliant business
23. How Much Does It Cost To Use A Business Broker To Sell Your Business?

The commission will be anywhere from 8 to 12% of the total sales price paid at closing. So the range of the percentage depends mostly on the business size and its complexity.

24. What Documents Are Needed To Sell A Business?

The following are some legal documents needed to sell a business;

  • Note of seller financing
  • Offer-to-purchase agreement
  • Non-disclosure confidentiality agreement
  • Personal financial statement form for buyer to complete
  • Statement of Seller’s discretionary earnings and cash flow
  • Financial Statements for current and past two to three years
25. How Can You Sell Your Small Business Fast?

The following are the secrets to successfully sell your business fast;

  • Learn strategies for a quick business exit
  • Reach out to likely buyers
  • Sell to your employees
  • Add a business partner
  • Liquidate your assets
  • Offer incentives
26. Are Business Brokers Worth It?

The simple answer is yes! Most of these intermediaries sell small businesses worth less than $1 million in value.

27. How Are Business Brokers Compensated?

Most brokers charge what’s called a success fee, which is a commission based on a portion of the price paid at the closing of your business. But the usual commission is 10 %.

28. What Are The Advantages Of Having A Business Broker When Selling Or Buying A Business?

A business broker can help investors negotiate the price of a business and structure a deal, and they can also guide them through all of the legal requirements. Business brokers will take care of the paperwork so that the buyer isn’t burdened by the additional stress.

29. How Do You Determine How Much Your Business Is Worth If I Want To Sell It?

You can determine how much your business is worth with this simple formula: business value equals assets minus liabilities. Thus, your business assets include anything that has a value that can be converted to cash, like real estate, equipment, or inventory.

30. Do You Pay Tax On Selling Your Business?

Yes! If you have held a business for less than a year, you’ll be taxed at your ordinary income tax rate with the IRS.

31. What Happens To Cash When Selling A Business?

Businesses expect to collect accounts receivable balances in cash within 12 months. Similarly, the inventory balance should be sold to customers.

32. How Do You Find Business Owners Who Might Be Willing To Sell Your Business Before They List With A Broker?

Talk to friends, family, and other business owners. Go to local meet-ups or trade shows where you can talk to brokers or potential buyers. You’ll need your business sale information online somewhere that you can easily direct interested parties to.

33. How Can You Find The Best Business Broker To Sell Your Business?

The best and possible way to find a business broker is to seek a referral from a trusted contact in your business network. Seeking out brokers in the business section of a newspaper is also a good option. Look for professional memberships or certifications as well.

34. What Is A Fair Brokerage Fee?

A brokerage fee is a cost a brokerage firm charges to handle transactions and services provided.

35. How Hard Is It To Sell A Small Business?

Selling a business can be difficult. It may be one of the most difficult things you can take on as a business owner. According to one study, only 20 to 30 % of companies that go to market sell.

36. What Happens To Cash In The Bank When You Sell A Business?

99% of the time, the cash in the bank is for the seller to keep, which is to be considered by sellers as part of their proceeds of the sale.

37. What Taxes Do You Pay When You Sell A Business?

You pay capital gains tax if you’re a self-employed sole trader or in a business partnership. While other organizations like limited companies pay Corporation tax.

38. How Long Does Selling A Business Take?

The average time to sell a business is 6 to 9 months.

39. What Are The Signs Of A Bad Business Broker For A Small Business?
  • They have no location information
  • They pressure you to act immediately
  • They request an upfront payment or fee
  • They do not ask for your credit history
  • They are lacking a legitimate online presence