Should I use a broker to market and sell my business or sell it myself?
Selling a business can be a seamless process when you choose to engage a professional broker but you’ll need to choose wisely to get the best possible deal.
Selling a business may be the biggest business deal that an owner will ever be involved in. It is, therefore, crucial to properly prepare your business and make it sale ready.
While many owners choose to use third parties to help them market and sell their business it is important to realise that not all brokers are the same. So, if you do choose to use a broker to help sell your business, you should do so with great caution.
With over 30 years’ experience in business broking, I have seen all that the business broking industry has to offer – the good, the bad and the ugly.
Most business owners don’t have any real experience in selling their own business and most wouldn’t know where to start. This is where an experienced business broker can help. An experienced Broker can use their market knowledge to properly value your business and ascertain the right selling price and convince a buyer on the business merits. Using a broker comes with a price, however using a good broker is well worth it!
They not only can help you to find a good buyer but walk you through what sometimes is an incredibly complicated process.
However, the wrong choice of business broker can have disastrous consequences. AN experienced or careless broker can destroy the sale value of your business.
How do I pick the right broker and how do I know if they are really any good?
Here are some deal-breaking questions-:
- How long have they been selling businesses?
- What are their qualifications?
- Have they sold businesses similar or comparable to your business?
- Can they provide you with recent case studies of sales?
- Can they provide you with references from previous vendors that they have successfully sold their business for?
If the broker can’t provide answers to these, then proceed with extreme CAUTION. My suggestion is do not proceed any further and find someone who can provide you with evidence of their experience and success in the industry.
Also be wary of brokers asking for excessive marketing dollars upfront. A lot of brokers collect advertising and marketing fees claiming that they invest the money to help promote your business. This isn’t necessarily true. Many brokers pocket a percentage of those fees. In fact, a lot of brokers live off the marketing dollars that they collect without having to actually make sales.
You don’t necessarily need a broker to sell your business there are many D.I.Y. and self-serve options available.
If you genuinely know what your business is verifiably worth based on how much profit the business actually reflects on the books, then selling without a broker can be an option. Alternatively you could also engage an experienced broker to help set you up and make you sale ready for a fixed fee thereby saving you hefty commissions.
Establishing a sale price – what is the right price for my business?
When it comes to selling your business, there are various valuation methods that will give you an approximate fair price, but at the end of the day the business is only worth as much as someone will pay for it.
Brokers can use their market knowledge to establish a sale price and negotiate a compelling case with potential buyers.
Some business owners complain that brokers want to push prices down to close a deal. In some cases this may be true, but in reality the market price is based on what a willing vendor is happy to accept as a sale price and what a willing purchaser is happy to buy at that price.
Whether or not you choose to engage a broker depends on how confident you feel in your sales and negotiating skills. Particularly when you have built a business from nothing, putting its fate in a broker’s hands is a very personal decision.
If you do choose to go with a broker, it’s essential that you do your homework.
An experienced Broker can really help clinch a sale, but business owners must look beyond the sales hype and rhetoric and discuss the specific services that the broker will provide. Check the finer details as there are important decisions to make about any engagement, including extra fees/costs, termination rights, cooling-off periods and the obligations of both parties.
All these aspects need to be fully understood before you sign on the dotted line.
How will they find a buyer?
One of the main advantages of using a broker is that you have access to their online marketplace presence and database.
Are they really representing my interests?
Brokers will be the go-between for buyer and seller, helping to bring the two parties together. For owners inexperienced in selling a business, this may be advantageous, as the broker’s fees will more than pay for themselves with a successful negotiation and a great sale price.
To sell your businesses, or for more advice on selling, contact me here
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