How to Sell a Business Without a Broker: 7-Step Guide

Should you use a broker to sell your business?

Most business owners do, or at least they think they have to. However, there are cases when using a broker may not align with the sale of your dreams.

The key is knowing when you need one and when it’s best to sell independently.

In this article, we’ll discuss the pros and cons of hiring a broker and give a step-by-step guide for selling your company broker-free.

TL;DR - How to Sell Business Without a Broker

Take control of your exit plan and sell your business privately with these steps, which we’ll elaborate on in this article:

Identify your ideal buyer
Determine the value of your business
Set a timetable
Prepare the necessary paperwork
Market your business
Negotiate a deal
Finalize the sale

Selling your business independently doesn’t necessarily mean going with zero guidance. You can consult a team of M&A experts to ensure you’re shaping a successful exit strategy.

Reach out to us at Exitwise, and we’ll connect you with experts in your industry who have the strategic expertise and specialized skills you need.

When is Going Broker-Free a Good Idea?

How do you know when selling without a broker is the better option? In the following cases, going at it on your own may be best:

You Already Have a Buyer in Mind

You would typically want brokers for their network. They can connect you with people within your industry that fit your ideal buyer profile.

So, if you no longer have to find a buyer, you would pay the same broker cost for half the work.

You Want to Keep the Sale Quiet

If you want to keep the sale private, going broker-fee is the way to go.

Such a case includes if you’re selling to family members or want to keep your company’s perceived value high. In some cases, going public with a sale may send the message that business is going downhill.

You Have a Small Business

The consensus is that small businesses have a lower chance of selling than mid-sized to large corporations—only 15 to 30% of small businesses listed by brokers are sold.

There are several reasons for this, such as fewer efforts from the brokers due to fewer commissions.

In such scenarios, it’s best to sell without involving a broker to maximize profits.

When Should You Consider Using a Broker to Sell Your Business?

Business owners have a real incentive to use brokers with years of experience and industry knowledge.

It’s just a matter of determining whether these apply to you:

You’re an Inexperienced Seller

No M&A process is simple.

Multimillion-dollar companies have more complex business and financial structures, which require expertise and market intuition to sell successfully.

On the other hand, small business owners have a higher stake in their companies, making sale outcomes extremely personal.

So, if you’re an inexperienced seller, you would need proper guidance from an expert intermediary.

You Want to Save Time

Selling a company is as meticulous as it’s time-consuming.

Depending on how prepared you are, planning, executing, and finalizing the sale may take months or even years.

Hiring a broker ensures you can still go on with your schedule as usual.

You Can’t Handle the Legalities of a Sale

Selling a business also involves compliance with legal and regulatory requirements.

If you don’t want to deal with fine print, a broker can ensure you’re covering all your bases and that you and your buyer get a fair deal.

Want to know how to choose the right broker? Take note of these business broker red flags.

Advantages of Selling Business Without a Broker

While having a broker is a plus, taking over the reins of the sale process on your own has its advantages:

More control over the sale: You don’t have to worry about conflicts of interest or pooling buyers that don’t align with your goals.
Higher profit: Selling your business yourself means the sale price doesn’t get eaten up by hefty professional fees.
More personal negotiations: You may approach potential buyers personally and negotiate a higher price by leveraging the depth of your understanding of the business – both its strengths and weaknesses.
“Quieter” sale: Selling a family business? You can keep things private by opting to take care of the sale yourself.

How to Sell Your Business Without a Broker: Step-by-Step Guide

Follow these steps to sell your business without a broker:

1. Identify Your Ideal Buyer

Why you’re selling will impact both the attractiveness of your business and who your ideal buyer is.

For example, if you’re selling because you’re retiring, you may be interested in maintaining your legacy. This means your ideal buyer should:

Hold the same values
Have experience in the same field
Align with you on a business trajectory

2. Determine the Value of Your Business

One of the most crucial aspects of the sale process is the M&A valuation.

This determines the true value of your business by examining aspects like your finances, operations, management structure, and growth potential.

While you may arrive at ballpark estimates using shorthand methods, such as rule-of-thumb business valuation, it’s important to work with an expert to set realistic figures.

This ensures you’re not overvaluing (making it harder to pitch) or undervaluing your business (selling yourself short).

3. Set a Timetable

Selling a business usually takes a month to a year, but that depends on your preparedness, brand strength, and potential.

Set a timeline for aspects like pooling and qualifying buyers, preparing the paperwork, and negotiating to improve your control of the process.

Pro tip: You can’t overestimate the importance of a well-timed sale to improve the chances of selling.

Consider factors outside your control that will affect the value and marketability of your business, such as market mood and the economy. Considering these will help you set a reasonable timeline for the sale.

4. Prepare the Necessary Paperwork

Next, get your business in order. Make sure operations are running smoothly, your financial statements are up-to-date and complete, and there are no legal or compliance issues.

Once that’s taken care of, prepare a confidential information memorandum or selling pack that details everything a potential buyer needs to know to make an informed decision about the sale.

This includes:

Financial statements
Executive summary

Legal documents

5. Market Your Business

You can leverage your network to effectively market your business. List potential buyers from within your industry, such as similar businesses and even competitors, and start there.

If you choose to list your business for sale, there are countless online marketplaces, such as BizBuySell.

6. Negotiate a Deal

Once you’ve caught the attention of a potential buyer, it’s time to prepare for negotiations.

Give them time to consider, and be ready for questions. This is also where preparing a thorough selling pack is crucial. The more complete the information, the quicker the negotiations will go.

Here are some tips to help you negotiate confidently:

Listen to understand what the other person wants.
Anticipate potential areas of conflict or problems and prepare answers ahead of time.

7. Finalize the Sale

Once your negotiations have reached a mutual point, it’s time to finalize the deal.

To prevent any issues during the turnover, create a bill of sale and sale agreement that outlines the following details:

Payment structure
Turnover plan
Terms and conditions

Does selling on your own feel overwhelming? We can help you find M&A advisors who can guide you at crucial moments in this lengthy process, even if you choose to sell without a broker.

Common Pitfalls to Avoid When Selling Independently

Avoid major hiccups during the sale process by taking note of these common mistakes that business owners make:

Unrealistic expectations: It’s common for business owners to assume a valuation of their business that is too high. After all, it’s something they built with blood, sweat, and tears. However, an unrealistically high valuation can turn away discerning buyers.
Focusing on one potential buyer: Chances are you already have a buyer in mind, and that’s good! But don’t limit your options to one or a few. Always have a Plan B (and C) ready.
Not enough preparation: The process typically drags on when a seller hasn’t made the necessary preparations before deciding to sell. Give yourself 1 to 2 years to ensure your operations are in top shape, your books are updated, and legal obligations are taken care of.

Best Practices for Selling Business on Your Own

Selling a business independently can seem daunting, and rightly so. But even a novice entrepreneur can make a graceful and profitable exit with these best practices:

Build an attractive business: Buyers want a business with considerable potential for profitability and growth. You can demonstrate that even when selling a startup with low or negative profitability. How? By focusing on its growth potential and its demand in the marketplace.
Understand how valuation works: The value of your business is the foundation of a profitable sale, which is why you should understand how exit valuation works. You can also hire a valuation expert to leverage their experience and expertise.
Speak to M&A experts: People with experience selling similar businesses will naturally have insight into the market you may not have. When in doubt, seek guidance from M&A advisory services.
Negotiate with finesse: Effective negotiation is a blend of confidence, respect, and relationship. When you approach your discussions by focusing on what your potential buyer wants or needs instead of pushing the envelope, you are better positioned to arrive at a favorable outcome.

Frequently Asked Questions (FAQs)

You may have more questions about selling without a broker. Check out these FAQs below:

Can I Still Get Help if I Choose Not to Use a Broker?

It is perfectly fine – in fact, recommended–to seek expert counsel even when you’re selling your business without a broker.

This will ensure you have the guidance you need in areas outside your expertise.

Exitwise can connect you with top M&A experts, such as tax lawyers and valuation professionals, so you can avoid the time-consuming work of searching for and vetting them yourself. Let’s chat about how we can get started.

Is it Hard to Sell a Business?

Selling a business can be complicated because it involves thoroughly examining your business–from the management structure to operations to finances.

How Do I Determine the Value of My Business Without a Broker?

There are three main approaches for valuing a business, namely the income-based, asset-based, and market-based models.

But if you want a quicker route, you can use our valuation calculator to determine an estimated value based on your existing data.

What Are the Legal Considerations When Selling a Business on My Own?

Some legal considerations to take note of are:

Fiduciary duties to partners and other stakeholders
Buy-sell agreements
Disclosure obligations

Conclusion - Can I Sell My Business Without a Broker?

It’s possible to sell your business on your own. It may even be the route that ensures your interests are taken care of throughout the sale process.

To do so, prepare your business ahead of time to improve its attractiveness, determine an accurate valuation, and negotiate confidently and fairly with potential buyers.

Remember that even if you sell independently, you can get expert guidance by consulting M&A experts with experience selling businesses like yours.

Need a team of M&A consultants? We can assemble one that will maximize your sale and facilitate a smooth exit. Talk to us today!