Are you in the process of selling your business? Do you want to sell your business without involving the services of a broker? If your answer to the questions above is YES, then I advice you read on. No doubt, selling your business through a broker has many benefits and can save you a lot of headaches. You can remain focused on your business until a serious buyer emerges, since the role of finding and corresponding with potential buyers will become that of the broker.
However, selling your business shouldn’t necessarily involve a broker. It is possible to handle the sale of your business yourself and save the 10% commission that the typical broker would charge; especially if you have a particular buyer in mind, such as a relative, friend, or employee, and you feel comfortable with handling the whole process with your accountant and attorney.
Even if you choose to hire a broker, chances are that you will still be involved in the selling process because potential buyers will have many questions that only you can answer, since no one knows your business better than you.
So, hiring the services of a broker may not be necessary after all, provided you can handle the intricacies of the sales process yourself. So if you are planning to sell your business—soon or later—without involving a broker, then below are ten good tips that will help you through the process:
Top 10 Kick-Ass Tips for Selling a Business without a Broker
Though you won’t be involving a broker, you shouldn’t be a solo player. You will need a strong transaction team led by an experienced attorney. The attorney will not only add value to the transaction, but will also help you build up the rest of the team and tailor them to the deal at hand. You will also need an accountant and a few other professionals. Having a good team is germane to the success of the deal, so be sure to build a strong team that is up to the task.
Before taking your business to the market, it is very important to meet with your transaction team and map out a solid plan as to how your business would be sold. This is necessary because your intent to sell your business will attract different players, different risks, different timing, and different other factors. So, you should think through the issues with your highly experienced team, set realistic milestones, and monitor your progress.
This goes without saying, but there are parts of this process that are commonly overlooked. For example, most sellers don’t investigate the reputation of the buyer.
Is the buyer a corporate entity that treats its employee well or one that treats them like slaves? Is the buyer an individual with a bad reputation? The web is a good tool for finding background information about any individual or firm. Learn all the vital steps of the due diligence process and ensure that none of them is left out.
4. Create a competitive environment
Adopting strategies that will help initiate competition among potential buyers is a good measure to make the most from the sale of your business. For example, you can make each potential buyer aware that other buyers are equally interested in your company and that you are likely to sell to the fastest buyer or the highest bidder.
However, this strategy must be played very carefully and should be handled by someone with great experience, such as a strong corporate lawyer.
5. Let your lawyer handle the negotiations
You should leave all negotiations about your business to a strong corporate lawyer. No doubt, you are no match for those venture capitalists or private equity firms who do deals for a living. If you get into the same boat with them, they will most likely take advantage of you in ways you may not know about. So, leave a smart lawyer to confront them.
6. Watch your emotions
Most of the time, you will deal with potential buyers who withdraw their emotions out of the deal and are very disciplined. Such buyers will most likely walk away if they think your deal is stretching them beyond their limits, regardless of what stage of the deal they are at or how long time they have spent on the deal.
On the other hand, you, the buyer, have a great tendency to become emotionally attached to a deal as it proceeds further, which will lead to poor decision making and risky positions, such as selling for a lower price if the buyer demands that as the condition for sealing the deal. So, you must maintain your objectivity and discipline.
7. State terms clearly
Only few things scuttle business deals more than unclear terms and conditions. Remember that the process of selling your business will involve absolute agreement between you and the buyer on a good number of terms and conditions that bind either or both parties.
So, use clear language in your papers and documents. And involve your attorney in the process of stipulating and agreeing to terms and conditions that bind the deal.
8. Don’t compromise
There will be times during the process of negotiating with potential buyers when one party will need to shift ground on some issues. Regardless of what the issues might be, stick to one rule: never be the first to shift grounds if you really want to maintain negotiating leverage and credibility.
If you shift grounds on one issue, chances are that you will still have to do the same on many more issues during the deal, which may leave you badly burned in the end.
9. Watch for buyers’ gimmicks
Buyers employ all kinds of tactics during negotiations. It’s usual for them to play a “good cop” role from the start—dancing to your tunes and seeming like your dream buyer, and then start playing games at the later stages of the deal. These games vary from trying to cut costs to stating that they no longer understand a clear part of your terms.
10. Check your plan as you proceed
Your plan will be your guide throughout the process of selling your business. And the only way to ensure that you don’t falter is to keep checking the plan at each stage of the deal. Checking your plan regularly will help you adjust quickly whenever you are about falling off track.