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.
Take control of your exit plan and sell your business privately with these steps, which we’ll elaborate on in this article:
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.
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 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.
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.
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.
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:
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.
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.
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.
While having a broker is a plus, taking over the reins of the sale process on your own has its advantages:
Follow these steps to sell your business without a broker:
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:
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).
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.
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:
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.
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:
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:
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.
Contact us to learn how we help clients get expert guidance.
Avoid major hiccups during the sale process by taking note of these common mistakes that business owners make:
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:
You may have more questions about selling without a broker. Check out these FAQs below:
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.
Selling a business can be complicated because it involves thoroughly examining your business–from the management structure to operations to finances.
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.
Some legal considerations to take note of are:
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!
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
