If you own a company and are thinking about retiring, then you may be wondering: Should I sell my company myself or hire a business broker?
You may be deciding whether to pass your business down to one or more of your family members. Some considerations are, do they have the capabilities and interest to take over the company. Certainly, there would be a higher comfort level if they are already working in the business. This would give you a better idea of their skills and interest.
If they are interested and have the skills, then you probably don’t need a business broker. You can just hire an attorney who can draw up the necessary paperwork to transfer the business.
If you don’t have family members with the interest or abilities to run the business, then there is a lot to learn about selling your company. We will outline some of the considerations to answer the question: Should I sell my business myself or hire a business broker?
One of the first things to consider is when do you want to be fully retired and how do you want your transition period to look. For instance, in most cases, the buyer will want you to stay on for a transition period. This transition period can vary quite a bit depending on what the seller and buyer are looking for. We’ve seen transitions that are as short as a day and as long as 8 years or more and everything in between.
A common transition is that the seller includes a month of a full-time transition in the business’s sale price, and then more is negotiable and sometimes included in the sale price. Often, a consulting agreement allows the seller to work part-time after the initial month and get paid based on how many days or hours they work.
As you can see, there is no one-size-fits-all for transition periods. Transitions can be a good way for the owner of a business to ease into retirement. Many business owners like the idea of a transition, so they don’t have to start building a brand new life right away.
Some owners like to work; they just don’t want to work full-time and want the freedom to travel more and let someone else handle the things they don’t want to do. If this sounds good to you, it is essential to get a buyer who you enjoy working with and feel good about.
Whenever a business owner starts to consider retiring, they should start to make an exit plan if they do not have one in place already. Many business owners do not have a succession plan and are more likely to sell their business. They may be wondering, how in the world do I sell my business? There are two common routes; you can hire a broker to manage the sale of your business, or you can sell it yourself. Selling a business without hiring a broker is similar to selling your house without a real estate agent. It can be done, but there is a large amount of paperwork involved and agreements to be made between the buyer and seller, and it is much more involved than just selling a house.
When thinking about retiring and selling your business, the question comes to mind. Can I sell this business without a broker? Yes, you can! Just as many homeowners manage to sell their homes without a realtor, business owners have managed to sell their business without a business broker. Usually, business owners who sell their business in a private sale are only successful if they already have an interested buyer. Once they have a buyer, they may still hire an M&A firm or attorney to manage the business ownership transition and paperwork. So, how should I sell my business without a broker if I don’t have any interested buyers?
May business owners weigh the pluses and minuses of selling the business without a business broker vs. selling with a business broker. To sell your business without a business broker, there are seven things you should be able to do; determine an accurate business valuation, advertise that your business is for sale, meet with potential buyers, discuss a contract of sale with business buyers and come to an agreement, and process all of the paperwork and taxes for the sale of your business. At the final stage, you will need to hire an attorney to help with the final proceedings of the sale of your business. If you try to finalize the sale of your business without an attorney, there is a huge amount of financial risk involved. Speaking of finances, make sure you have an accountant to help manage the taxes involved with the sale of your business. You do not want to get fined or, worse, cited for tax evasion.
If the long list of things you would have to do on your own wasn’t compelling enough, we have quite a few reasons business owners hire business brokers to sell their company. One of the main areas a business broker can help sell your business isn’t just finding prospective buyers (although that is important). Our existing clients point out that one of the best things we do is help mediate the sale of their business. Since we are professional business brokers, we know how to manage negotiations and do a correct business evaluation. If you hire a business broker that can’t do that well, you better run away fast!
At this very moment, when you consider selling your business, you’re probably thinking of the positives of retirement and being able to enjoy life outside of work. On the day you sell your business and are discussing the terms of the business sale, you will realize just how emotionally invested you are in your business. You have spent countless years building your business from the ground up, and selling all of your hard-earned work will be emotional. Having a professional business broker to mediate and manage the transaction will help make the transaction clear and effective.
This is where a business brokerage can help screen buyers financially and make sure they are the type of people that sellers like to work with. We look for buyers with good personal skills and flexibility in offering a seller the option to work at things they enjoy and are best at.
Also, a Business Broker will usually introduce multiple buyers so that a seller has different options to choose from. There is no accounting for personal chemistry, and that you can only see from spending time with each other. It’s a two-way street, so buyers also want someone they are comfortable working with.
A good Business Broker can set the stage for buyer and seller to get along with introductions and give both parties background on the other person before a meeting occurs. This helps start the relationship off with confidence and makes it easier to focus on building a relationship.
You may decide that you were ready to retire yesterday and want to provide as little of a transition period as possible. In this situation, a Business Broker can look for potential buyers with experience in the business. In this case, you may not need to give much of a transition unless the company is very dependent on you. If some of your staff have relationships with customers and are knowledgeable about what you do, then it makes it easier for a buyer to run the business without you and makes your business more attractive.
In terms of timing on when to start the sales process, it usually takes about 6-10 months on average to sell a company, so if you consider that along with a transition period, you may want to start the process of selling your business 1-2 years or more from when you want to exit the business.
After you have an idea of when to start the process of selling your company, the next question would be, how much can you get for your company? This is important for a couple of reasons. One is that you want to be confident that the proceeds from the company’s sale plus your other assets and income will be enough to support you in retirement.
This is important because you want to have realistic expectations of a possible asking price and offers for your company. You usually want to have an asking price that leaves some room for negotiation but isn’t so high that you don’t get any offers for the business.
To provide a potential asking price, Business Brokers will typically review your last 3 or more years of tax returns and profit and loss statements plus a year-to-date financial statement and interview you to find out about your business’s strengths and weaknesses. They will ask questions about your customers, products and services, employees, competitors, growth opportunities, and challenges. Then they will compare this information with their knowledge of the market and what other similar companies sell for and provide you with a recommendation of a possible asking price.
It’s best to have a business broker that doesn’t charge an upfront fee. That way, you can be confident that their goals will be aligned with your purpose of selling the business in a timely fashion at the best price.
When you are selling a business, the word mustn’t get out to your customers, suppliers, employees, and competitors that you are selling your business. If you are representing yourself, it is tough to prevent this from happening. Business Brokers are trained in protecting their client’s confidentiality.
They will write a summary of your business that provides some information but not the Company’s exact name or location. Before giving these details, they will have potential buyers sign a confidentiality agreement and get information about whether they are qualified to purchase the business. This limits the number of people that find out that the company is for sale and prohibits them from spreading the word.
If you have a Company that is making an annual net income of $250,000 to $7 Million+, the good news is that there are plenty of potential buyers for your Company. These buyers will include private equity groups, companies within your industry and outside of your industry, and wealthy entrepreneurs. It’s not about finding someone interested; it is about finding the right buyers for a particular business.
A top business broker will have a comprehensive marketing program to generate the right buyers and weed out the tire kickers to focus on running your business and maintaining profitability during the sales process. The last thing a potential buyer wants to see is a business that has gone downhill because the owner has spent too much time speaking with buyers, trying to sell their business. If you are still wondering: should I sell my company myself or hire a business broker, confidentiality is a significant consideration.
Experienced Business Brokers will make wise use of their client’s time by only introducing qualified buyers to the seller. Having spoken with thousands of potential buyers, an experienced business broker will have the instincts and knowledge to determine which buyers will most likely buy a particular business. They are also good at working with many buyers to create a bidding environment for their client’s business, which provides leverage in negotiations. They will help to negotiate not just the price but the terms and conditions of the accepted offer.
An experienced Business Broker will sell your business much faster and at a better price than if you tried to sell it on your own. Top business brokers have relationships with banks that they can bring in to provide financing. The banking relationships enable the Broker to have a keen understanding of whether a particular buyer can get funding for a given deal.
When you are selecting which offers to go with, the best business brokers will help their client to understand not just the highest offer but who is most likely to be able to close on a proposal and which deal structure would be best. Business Brokers make recommendations, but at the end of the day, an owner makes the final decision. Once you decide which offer to accept, there is still a lot of work to be done before sitting around a closing table.
Experienced Business Brokers can guide you through due diligence, and there are often things that come up, which can cause a deal to go down the wrong path. Buyers and Sellers will get differing opinions from their attorneys, accountants, family members, etc. Brokers can help keep things on track and guide both buyers and sellers to let them know what is normal and deviating from the norm.
Often there is a period of exclusivity that is granted to potential buyers to perform due diligence. If a buyer is dragging their feet, a Broker can use the leverage of other potential buyers waiting in the wings to keep things moving forward or switch to another potential buyer that is not prepared to move forward in a timely fashion.
An area that may need to be negotiated during due diligence is when a buyer can speak with customers or employees. Usually, this is done after a sale takes place, but in some cases, this may be permitted without alerting the employees or customers of a potential deal. It can be done more as a reference for a potential investor.
Potential Buyers will dig deeper into the financial information to confirm what they have been given. They will also look for possible risk areas, such as whether a large customer makes up a significant portion of the revenue and what would happen if that customer would be lost. They’ll look at contracts to determine whether some are expiring soon. They will also look at trends to see if a business is trending up or down. They will review if there are any lawsuits or liens against the company.
The process of negotiating a Purchase Agreement can either start right after an accepted offer, but more often, it begins when the due diligence is complete or at least off to a good start. Before engaging in an attorney’s costs, the buyer and seller usually want to feel comfortable that the deal is moving forward. If a buyer or seller needs an attorney with experience in closing business sale transactions, an experienced business broker can recommend attorneys with experience that they have done business with.
Usually, the seller’s attorney will be the first attorney to draw up a contract based on the Letter of Intent’s terms. In some cases, the buyer’s attorney will draw it up. They will typically go back and forth several times to negotiate the details of the deal. A business broker can keep things on track if the attorneys are at a roadblock. The best way to keep things moving forward is to establish good relationships with all parties to resolve any differences that may come up effectively.
After the purchase agreement is agreed to, the next step would be to schedule a closing date. Before the closing, the attorneys will make sure that any adjustments are made for bills that haven’t been paid yet but are accrued or vice versa. Once this has been done and the closing is scheduled, you can relax. At this point, the deal is typically good to go. The closing is just signing documents, exchanging funds, and any information about plans for the transition.
Hopefully, we have given you some more information to answer the question: Should I sell my company myself or hire a Business Broker? We offer a confidential consultation to discuss your specific situation and see if your business is something we can help you with. We can help you to avoid the problems that occur with trying to sell your business yourself and maximize your selling price.
Synergy Business Brokers is an Award-Winning Broker with over 18 years of experience. We have a database of over 40,000 potential buyers. You can hear what our customers have to say at Testimonials & Reviews and our Corporate Video.
Our focus is on selling companies with annual revenue of $700,000 to $70 Million+ in technology, the healthcare industry, wholesale/distribution, manufacturing, services, construction businesses, consulting, transportation, and more.
We sell companies in NY, CT, NJ, MA, PA, MD, VA, DC, TX, NH, LA, OH, and throughout the US. For a confidential consultation, please contact us at (888) 750-5950 or info@synergybb.com. Or you can fill out our seller registration form at Seller Registration.
