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.