Selling Your Business - Do you sell Privately or use a Business Broker?

Selling your business is a complex and often time-consuming process. The time taken for a typical business sale can last from a few weeks to a year or more and both the seller and the buyer have to go through a lot of processes before the sale is finalised and settled.

As with any formal practice, selling a business also needs to be done in a proper way to ensure a win-win situation. It starts with the buyer deciding to put their business up for sale. The reasons for selling can be many and varied like retirement, partnership disputes, the need to spend time with family and so on. Once the decision is made to sell, the next big decision is whether to sell it privately or use a business broker, Both methods have their own pros, cons and the decision is not always easy.

Selling on your own

In the case of normal real estate properties and other assets, many people avoid using brokers and try to sell their property on their own. The same can be applied for a business sale also. Selling your business yourself will help you save money that you may have to pay as broker fees. It is also the best way to go about when you already have a prospective buyer. Most of the times, private selling is done when businesses are sold to a known trusted social circle like friends, relatives, partners or acquaintances. It is also stated in the statistics reported by the brokerage firms that about 90% of the business sales occur with such trusted buyers, making private selling the logical option to go with.

The convenience and effectiveness of online websites that help in the private selling of a business also makes selling on your own much easier. You can advertise your sale on the net and reach buyers from around the globe and potential buyers can contact you directly.

Some of the advantages of private selling are

• Save money on the brokerage commission, which could be up to 5-7%
• Speak with potential buyers directly and get to know them on a personal level.
• Ability to control and monitor the sales process.

Private selling is especially beneficial for small businesses whose value is not enough to cover the minimum broker commission set by the brokers.

Many people think as they know their business best, they will be able to sell it profitably. This is actually true to some extent. But it cannot be the case always. Sometimes people tend to overvalue or undervalue their businesses and this may adversely affect the sale. It is important that you accurately value your business. In Australia there are government websites that advise on how you can value your business and it is a free service.

Another possible disadvantage of private selling is the fact that business owners do not have enough time to spare for their business sale. A business owner must be sure he can commit the time to selling the business without having a detrimental effect on the day-to-day running. Selling a business requires a lot of time, commitment and resources which is not always practical for the business owner to tend to. In these cases, professional help is highly recommended.

Business selling also requires a certain amount of legal and expert market knowledge You will need to have a solicitor or similar, to conclude the legal issues regarding the sale.

Using brokers

Brokers are intermediaries who help you in selling your business for a commission. Some of the benefits of using a broker are

• They give professional insights into the market status and are able to value your business appropriately
• There is no interruption to running your business while it is still on sale
• They help you with documentation
• They have experience in dealing with problems in sale and can come up with solutions for unexpected problems to give you a smoother sale. Their experience can also help to get higher price
• Using brokers saves you time
• Using brokers can help you keep your business details confidential

Unlike selling your business by yourself, hiring a broker is less time-consuming. Using a broker may help in having a smooth sale process and help get a higher price for the business but this is not always the case. Sometimes, choosing an inefficient broker can lead to big disappointments and at a great cost. Some of the disadvantages of using brokers are

• They are usually expensive. Small businesses find it difficult to hire brokers due to this reason as some brokers fix a minimum commission that could take away a large part of their profit.
• There is no assurance that the broker works in favour for you.
• Incompetent brokers can cause loss.
• Brokers always look forward to big sales and their priorities may change.

As you can see, many of the disadvantages of using brokers are the effects of choosing a bad broker. Here are some things you need to expect from a good broker.

• Experience
• They should be trustworthy
• They should be able to assess the market conditions and value expertly
• They should have good negotiation skills.

Selecting a good broker is important to make a successful business sale. You can follow the following guidelines to get trustable brokers

• Make use of referrals and ask for recommendations from your CPA, attorney or business associates.
• Make sure you choose a broker who is specialises in your business domain
• Meet with them on a few occasions before you sign the contract to make sure you have got the right person for the job.
• Ensure that their fees are reasonable and within your budget.
• Brokers who are able to take charge of everything and guide you throughout the selling process are the best.
• Your broker should be able to provide you with client references. You can use these to evaluate them.
• Enquire about the details of the current listings they have and the previous businesses they have sold.
• Look for professional certifications, affiliations to local or state broker associations. Although these can be good indicators of efficiency, you should not depend only upon these factors for deciding.

Your broker should be someone whom you can trust and has a good track record.