Besides avoiding percentage fees, there are actually a number of reasons that someone may want to avoid using a brokerage when selling their business. This includes the time you take to prepare all the way to the end of the sale, according to SCORE, a nonprofit association for entrepreneurs and partners of the Small Business Administration (SBA). Selling the business yourself allows you to https://www.xcritical.in/ save money and avoid paying a broker’s commission. It’s also the best route when the sale is to a trusted family member or current employee. Selling a business involves negotiations, discussions, and a lot of leg work. If it’s not possible for all this to occur in person, then certainly using services like Zoom or Skype to hold business meetings with potential buyers digitally is possible.
This is when you’ll often run into tire-kickers, or people who claim they’re interested but have no real intention of buying your business. Once you’ve got your average net profit, you’ll need to figure out your industry multiple. The multiple is made up of many factors, some of which are mentioned above (brand strength, age, revenue diversity, etc.). You’ll also need proof that you own all the assets included in the sale. It may be easier for you to put together, but prospective buyers are going to want to see a more comprehensive financial picture.
If you’re on the fence about whether or not to work with a business broker to sell your business, feel free to contact the advisors at Allan Taylor & Co. There’s no charge, and no pressure, to get our initial thoughts on your business and goals for a sale. Talking to buyers without being prepared will doom any proposed deal to failure. You need to start from a position of strength, and maintain the trust of the buyer throughout the entire process.
If you’ve never had a business valuation done, now is definitely the time to do it. Ideally, you should understand how buyers value a business well in advance of ever wanting to sell. With that said, get a business valuation before you embark on an actual business sale process. Regarding that last point, one survey found that business brokers consider 70% of the businesses that contact them to be unsellable. The best business brokers are extremely selective, and tend to work with anywhere from 10% to 30% of the business owners who inquire about engaging their services.
After calculating your base figure, you’ll need to start putting in your add-backs. You essentially “add back” one-off or continual expenses that have no real effect on increasing or decreasing your net profit or overall cash flow. Going the private route may seem like an attractive option because you’ll save on commission fees, which in theory puts extra money in your pocket.
According to UK Business Brokers, more than 90 percent of businesses listed by low-end brokers never find a buyer. Selling your business yourself can actually result in finding more buyers, which creates more competition, and that drives the price higher. Usually, brokers will have lawyers and accountants that they trust or are on their payroll to do these tasks. But if you decided the best way to sell your business is privately, then you’ll have to assemble your own team.
And even if your business does sell, it’s rare that you get all your money at once. Your accountant could also offer a basic, cost-effective valuation for your business. The fate of your employees depends on the terms of the sale and the buyer’s intentions. Some buyers may retain existing employees, while others may choose to bring in their own team. Create high-quality print materials, such as brochures and flyers, to showcase your business.
We believe that hiring an experienced and competent broker tends to be a better route for most business owners than not. Small business owners are experts at running their business – they are not experts at understanding how to successfully sell a business. Your buyer is, in the end, the one who determines the value of your business when they decide what they’re actually willing to pay. The buyer is also looking to make a profit, which means that the amount they’re willing to pay will typically be somewhat less than the estimated value. Go into negotiations with an understanding of how much you’re willing to compromise on price.
- Your plan should include your target audience, key selling points, and marketing channels you’ll use to reach buyers.
- Gather your financial statements and tax returns dating back three to four years and review them with an accountant.
- There is specialized work and additional risk in selling businesses compared to selling homes.
- By building relationships with potential buyers, you can also gain insights into the needs and preferences of your target market.
- You’ll also need proof that you own all the assets included in the sale.
- You can protect yourself by signing NDAs (Non-Disclosure Agreements) with prospective purchasers before providing your selling pack or prospectus.
These include balance sheets, accounting information, and profit and loss statements. In conclusion, proper preparation is key to successfully selling a small business without a broker. Your plan should include your target audience, key selling points, and marketing channels you’ll use to reach buyers.
A broker would allow the business owner to continue running their business unaffected during the long months it takes to close a deal. After a while, you’ll have collected enough data to give you some idea of the type of prices that other companies are asking. These numbers may be three-times their annual profit or 10-times their annual profit.
If you haven’t already asked for a personal financial statement (if the buyer is an individual), do so immediately. If the buyer is another company or private equity firm, ask for their sources of funding as well as a list of other sellers they have worked with that you can interview. A Confidential Information Memorandum (CIM) is the primary marketing document that you will provide to interested buyers after they’ve signed an NDA. It should tell them enough to know if they’d like to move forward with the opportunity to buy your business without “giving away the farm,” so to speak. The business brokerage industry is largely unregulated, so due diligence is paramount when screening brokers. You don’t want to sign a one-year exclusive contract with an ineffective broker, or one with whom you are unable to work.
Their success will depend on their network’s experience to understand your business’ vertical, or their ability to find you new buyers if they don’t have an existing match. A successful broker should be able to create a broad market for the business by identifying and communicating with many buyers. Many are affiliated with larger business brokerages (similar to a realtor affiliated with a large brokerage like Re/Max or Keller Williams) although some operate independently.
The crux of the valuation will be some multiple of your business earnings based on comparable sales from your market. Then you will want to take steps to shore up your business’s financial performance and find ways to offload as much of the work that you manage personally. Remember, you want to sell a business, not a job, so the less involved you are in the cryptocurrency exchange vs broker day-to-day, the more valuable your business becomes. It is generally recommended that you keep your intention to sell confidential, to prevent spooking customers or employees, and to maintain the business’s value. Without the buffer of a business broker, it is more difficult to prevent word of your sale getting out before you complete the transaction.