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Any advice on selling a business without a broker?

Any tips or thoughts would be appreciated.

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Answers (9)
C21-Troop Business Services
Troop Business Services
CA
Premium Broker

Hi Phil, wondering how it's going so far. I am a broker, just so you know. As far as advice. Make sure you price it properly, have your financials in order (3 years of profit and loss statements and 3 years of tax returns), put a good package together that adequately describes your business and will answer most buyer questions, get an NDA for buyers to fill out, and get in touch with a business transaction attorney. Whether you engage a broker or sell on your own is one thing. If you do sell on your own, you really need the advice of an attorney. Even if you find a contract with blanks to fill in, I'd have an attorney review. Hope that's helpful. Jeff@TroopBusiness.com

Nov 23, 2009
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You might consider something in-between, a fixed price business broker, which is really more of a "self help" company. Business brokers can help in almost every circumstance, the big question is if their help justifies the price.

Oct 29, 2009
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Entrepreneur
Multnomah County, OR

Make sure you use a Non-Disclosure Agreement (NDA) and a Financial Statement up front before you release any information to a potential buyer. That will eliminate 90% of your time wasters right there. If they aren't willing to do that, they either don't have the money, or were never serious to begin with.

Also I would look into getting a good sales contract. I wouldn't expect a buyer to have one (unless you are selling a million dollar business), and in that case, you better get a broker.

Oct 28, 2009
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hi Phil,

Just as there are folks who manage to sell their own homes, there are certainly business owners who have succeeded in selling their own enterprises. Whether it is worth the time, energy and heartburn is obviously up to every individual seller but some of the critical issues you should address before considering this option are:

.The value of a home is infinitely easier to determine than a business. Similar homes in a location can be used as a baseline. How do you value a business? There are a myriad of ways to valuate larger businesses but small to medium sized enterprises simply do not fit any particular mold in most cases. In fact, the majority of small businesses are valued at the price that they eventually fetch. Cash flow, owner's benefits, net income before taxes, and the Fair Market Value of existing FF&E (Furniture, Fixtures, and Equipment) help to determine a "ball park" but the market determines the final Sales Price. Your best bet is to insure that there is a sufficiently open market among many potential buyers. SBX provides that market.

.Screening a buyer can be uncomfortable for FSBO's (For Sale by Owner) sellers - as well as the buyer. Working through a business broker gives you a professional buffer - we regularly interview and screen potential buyers so that you only meet with those folks who might reasonably be expected to make an offer.

.Do you have the time to communicate and/or meet with every interested party? As experienced business brokers, we already know that every listing will generate a flood of inquiries over time - usually upwards of 30 - 50 (depending upon the listing) but only 1 or 2 of these eventually result in an offer. Our job at SBX is to meet with each of these individuals until we find a buyer. .Do you have the sales/marketing/accounting skills to prepare a professional package for your business? SBX prepares a professional package for every one of its clients, including website presence, a financial package that includes a cash flow analysis, owner's benefit analysis, and an income tax return vs. financial statement reconciliation (whenever possible). This package is not only provided to registered buyers, but explained to them in great detail.

.Many buyers seeking to avoid brokerage fees are bargain hunters. It's human nature. Just as the FSBO seller is hoping to shave selling expenses, many of their potential buyers are hoping to do the same. In many cases, any savings earned by not retaining a business broker evaporate in the negotiation process.

.What is your time worth? In an effort to avoid paying a brokerage commission, many FSBO sellers actually spend much more in terms of business disruption, lost opportunities, and their own compensation rates while working with potential buyers, vetting those buyers, researching, negotiating, and closing.

I invite you to visit my blog: http://www.AustinBusinessesForSaleBlog.com - where you'll find some free advice on both the purchase and sale of a business.

Good Luck
Julie A. Barnes, CPA
President, SBX Inc.

Oct 28, 2009
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Cowboy Business Group
Business Broker
Utah County, UT

Yes, make sure you have plenty of time to invest and do not allow your business position to suffer, or decline, then you'll be in a position down the road to need a broker with a less than stellar financial picture.

Sep 16, 2009
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Phil, I am a business owner not a broker. My advice is get a broker. You will find that 99% of the people you talk with are not as serious as they think they are. In other words they are full of s**t. let them weed out the bad ones. It will save you a lot of trouble.
BUT---- the commission rate can be high. Just hope they get a great price for you.

Sep 11, 2009
Robert J. Bohacik
Arizona Sunbelt Business Advisors
Pima County, AZ

Why you should use a Business Broker!

Any business owner who has sold a business on his or her own will tell you it’s a long, tedious and stressful process. It consumes time and distracts you from the day to day operation of the business. Your focus should be on maintaining or increasing the value of your business, yet all of your time and energy is directed to the sale process.

That’s where an experienced business broker can pay huge dividends. There are many areas where the business broker’s expertise pays off:

• Confidentiality. If you as an owner attempted to sell your own business, that process alone reveals that the business is up for sale. Employees, customers, suppliers and bankers all get nervous and competitors look to make a kill. A business broker will protect the identity of the company and contact only owner approved buyers through a blind profile – a document describing the company without revealing its identity.

• Business Continuity. Selling a business is time-consuming for an owner who already is probably wearing many hats for the company. By taking on the additional load of selling the business, essential functions will get less attention and possibly cause damage to the business. The owner can maintain a focus on running the business when a broker is working on the sale.

• Valuing your Business. Putting a value on a business is far more difficult and complex than valuing a house. Every business is different, with hundreds of variables that have an impact on market value. Business brokers have access to business transaction databases that can be used as guidelines or reference points. The best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business, which is much more likely using the resources of a professional business broker.

• Reaching potential buyers. Business brokers have the tools and resources to reach the largest possible base of buyers. They then screen these potential buyers to determine if they have the technical and financial ability to support a potential acquisition.

• Marketing. A business broker can help present your company in the best light to maximize the sale price. He or she has an understanding of the key values that buyers are looking for and can assist in identifying changes that can lead to a better selling price.

• Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. An experienced business broker can level the playing field for a business owner making his one and only business sale.

• Closing a Deal. Since the business broker’s sole function is to sell the business, there’s a much better chance that a deal will be closed in less time. The faster the sale, the lower the risk of employee problems, customer defection and predatory competition. Business brokers know the necessary steps and procedures that must be taken to assure a successful transaction.

Utilizing the services of an experienced, professional business broker allows the owner to focus on running the business, reducing the risk of business erosion during the sale process. A sale facilitated by a business broker helps maximize sale proceeds by involving a larger universe of buyers in a confidential, competitive bidding process.

Sep 11, 2009
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Thanks for your response. On the flip side, would you mow your own lawn or hire a landscaper? Would you paint your own house or higher a painter? In other words, you do not always have to hire a professional for every task in life. I understand that selling a biz is not lawn mowing, but it is also not murder. That said, I do appreciate the insight and welcome any additional thoughts.

Sep 11, 2009
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The BAF Group LLC
MD

As a thoughful and articulate Business Broker, my advice is, DON'T TO IT! If you needed brain surgery, would you do it yourself? What kind of business are you in? Should I do what you do, and leave you out of it? Can't I do your business as well or better than you? Why should I pay you for your services, or for your profits? Why should you be in business, at all?

On more level-headed level, whether you use a Broker or not depends on your business. But keep in mind that a well executed business sale is a technically sound investment. In the vast majority of cases, we get the Seller more money than we are paid. And we protect the Seller in many, many ways that he/she is not capable of doing for him/herself. Does everyone need a Broker? Not necessarily. And the flip side of that is that we turn away 70% to 80% of all Business Owners that come to us, asking us to sell their businesses.

But that is the key: You have to work with an experienced, capable and hard working Broker, for it to be a worthwhile relationship.

By the way, if you were on trial for murder, would you act as your own attorney?

Sep 11, 2009

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