The “Go It Alone” Sell My Business Strategy
Once business owners decide to sell their business, they often have to make an important decision about whether to hire a business broker to handle the sale or go it alone. The main reason some owners gravitate towards trying to sell the business themselves is to avoid paying brokerage fees. However, selling a business alone can present numerous potential roadblocks including failure to secure qualified buyers, difficulties with properly appraising the business and handling the paperwork involved, and lacking the time to commit to finding the best deal.
Having a professional and experienced business broker helps a business owner maximise the value of their business and avoid the stress or pressure that comes with engaging in complex business negotiations. Just like growing a business, selling a business requires a well thought out strategy. A good broker will have the relevant expertise to handle a business sale transaction and the capacity to handle all the aspects attributable to a successful sale.
The ‘for sale by owner’ strategy or ‘go it alone’ mentality when it comes to selling a business can be detrimental and for any business owner who has worked hard to build a company, getting the best buyer for the best price is undoubtedly top of the agenda and therefore a worthy investment. With so much at risk, one cannot afford to underestimate the importance of hiring the right professionals for the job.
1. Only a professional business broker can properly value your business:
Many business owners do not have a realistic appraisal of value of their business. In some cases, they under value and in other cases over value their business. If not equipped with the know-how of how to apply appraisal methods appropriately, owners can make costly errors. Business brokers can help you get an objective fair market valuation that is best at the time of the sale. Experienced brokers will look at a range of factors in determining a value. Determining the value of your business requires both knowledge of valuation methodologies and an understanding of the landscape of buyers. A good broker will know how to properly normalize your income statement and how to apply a multiple-of-earnings assessment or alternative valuation methodology. Equally important, a broker will know whether your business is a candidate for a strategic acquisition, and how to price it accordingly.
2. Experienced business brokers handle the sale so owners can focus on the business:
Selling a business can be a full-time job and the demands can add stress to an owner trying to juggle both the sale and the running of the business. Throughout the selling process, clever business owners keep their businesses fully operational and add touches that would bolster the potential for a best-in-market sale. A broker will help with preparing the sale, collation of relevant documentation, promoting and marketing the business, vetting buyers, and negotiating the terms. This frees up the seller to concentrate on other operational aspects that strengthen the selling proposal. An experienced business broker will know how best to position your business to attract qualified buyers. Quality marketing materials, including a “teaser” summary and comprehensive overview, commonly called an IM or Profile of the business, will help attract the best buyer candidates and weed out unsuitable buyers. Brokers may also list your business for sale on their website as well as third party websites to target acquirers of companies that fit your size and profile. Running a sales process can be time-consuming and exhausting. In addition to preparation, the seller will need to manage multiple negotiations and respond to ongoing requests for information. Most business owners have their hands full just running their business. So, it makes sense to outsource much of the effort to a professional. A broker will help you avoid any business performance issues that might emerge if you are pulled in too many directions during the process.
3. Brokers have a network of buyers to whom they can directly advertise and market your business:
Getting the right kind of buyers interested in your business is what brokers are good at. They can drive up the selling price and maximise the value of your business by approaching potential buyers that you would not have access to. Because each business is unique, business brokers can qualify buyers quicker by using their data base of contacts looking to buy a business like yours. The right broker will also help you with a multi-faceted marketing plan which covers strategic marketing and advertising channels you would not have access to. The universe of potential buyers for your business may be wide and diverse, from individual entrepreneurs to strategic acquirers, private equity firms, and investors. There are pros and cons to each. A good broker will have in place a robust buyer network, as well as resources to reach additional candidates, so the right parties are reached. Additionally, a broker can help screen buyers to ensure they have the financial wherewithal to acquire your business, and the right skills to operate it.
4. Secure a successful sale quicker, and for the best market price:
You can save time and money by using an experienced broker who has experience and contacts to enable a swift and stress-free sale. The advantage of using a broker instead of doing it yourself is that brokers can typically reach greater numbers of prospective buyers and handle the bidding process expertly to secure the best deal. Businesses put up for sale through brokers generally have a much higher listing-to-closing rate compared to those listed directly by business owners. Purchase price is just one component of an offer. Deal terms significantly impact the attractiveness of a proposal. Is the buyer seeking seller financing or a performance-based earnout? Are you required to stay on for a lengthy transition? A broker can help you navigate terms, make informed decisions, and communicate effectively with the parties involved. Additionally, business acquisition negotiations can be emotionally charged. An experienced broker will help the parties keep emotions to a minimum and stay focused on a mutually beneficial outcome.
5. Business brokers maintain confidentiality and protect your reputation:
It’s difficult to vet potential buyers without revealing your identity, if, as a business owner, you choose to deal directly with buyers. Acting as an intermediary between you and the buyer, brokers will ensure that crucial information is not leaked out to competitors, suppliers, employees, or customers prior to concluding the sale since this can impact the deal substantially and possibly the company’s competitive advantage, management structure, profitability and so much more. A sales process requires disclosure of confidential information to multiple parties. Without the assistance of a broker, it can be difficult to confidentially engage with potential buyers. A broker can approach buyers, even competitors, with a “blind teaser,” followed by a non-disclosure agreement (NDA) before any information is exchanged. Likewise, a broker is less likely than a business owner to inadvertently alert employees or other stakeholders of the sale.
6. Documentation:
There are a number of legal documents involved in a business sale transaction, including an NDA, Letter of Intent (LOI), Heads of Agreement (HOA) and Sale and Purchase Agreement. While it certainly makes sense to engage a lawyer during this process, a broker can help defray legal costs by drafting agreement with their own in-house lawyer, and a working knowledge of the key terms and opportunities for negotiation. Leveraging the knowledge of a broker to help with these agreements, while engaging your lawyer for document review on key deal points, can be an effective division of labour and mitigate some of the costs.
