You may have come to a point where you want to sell your business and pursue other interests.
Business Brokers offer business owners the opportunity to sell their business while maintaining confidentiality.
However, many business owners can sell their business themselves if they are willing to invest the time and effort to avoid mistakes and save money.
Advantages of Using a Broker
Business brokers are similar to real estate brokers. They bring buyers and sellers together to complete the purchase of the business. However, using a business broker can have both an upside and a downside.
On the upside, business brokers help business owners maintain confidentiality during the selling process. While they are courting potential buyers, business brokers may not reveal the name of the business or the owners.
Business brokers can also save time. Since brokers are specifically looking for buyers, you can continue to focus your time on running and managing your day to day activities.
Disadvantages of Business Brokers
While there may be benefits to using a business broker to sell your business, there are also disadvantages.
Business brokers charge a great deal of money for their services and can be quite expensive. As a business owner, you are paying not only for the time and effort that the broker invests in selling your business, but you are also paying for their expertise in knowing how to sell your business.
Brokers are most likely not going to have a great deal of knowledge in regards to your business or industry. Sure they can be brought up to speed on how things are traveling, but when it gets down to the actual ‘selling’, there is no better person to deliver the pitch then the actual owner.
Also, some businesses are simply difficult to sell to someone else because of market potential. Some examples of difficult to sell industries include:
- New Technologies;
- Multilevel Marketing Businesses;
- Liquor Stores;
- Auction-Based Businesses;
- Businesses Based on Owner Personality.
Advantages of Selling a Business Privately
Selling a business privately can be a time-consuming process and it is easy to make mistakes. For many business owners, it is important to carefully develop a plan for marketing their business and take all of the steps necessary to create a successful sale.
The biggest advantage to selling a business privately is that it is much less expensive than using a business broker. Instead of investing in the broker’s time and effort, business owners can perform all actions on their own.
For example, a business owner can advertise their business or map out a transition for their business during the selling process. And with the power of the internet, connecting with potential buyers can be done with ease! In fact, most brokers today will use the exact same website you can advertise on to connect with buyers.
Another advantage is that business owners can sell to someone they know and trust. Many business owners use their own circle of friends and contacts to market their business when they want to sell it. Even your direct competition could be interested in acquiring your opportunity.
As a result, it may be possible to find a buyer who already has as established track record or has the best interests for the business at heart.
As the owner, you will be able to answer any questions they have with ease.
Disadvantages of Selling a Business Privately
While there are many things a business owner can do to sell their business, it is easy to make mistakes when selling a business privately. One of the biggest disadvantages is that business owners can fail to complete specific documents that need to be completed for the sale to be legal, not to mention more often than not, over valuing the business.
Always get an independent valuation otherwise your may sit on the market for a very long time, generating little to no interest.
Although many business owners start to market the sale of their business to their own circle of associates, it can be difficult to find viable buyers.
Often, business owners do not want others to know they are selling their business. If you are marketing the sale of your business, you will need to disclose it to employees, business associates and others in order to create interest. For many business owners, this may open the door to questions about why you are selling and other uncomfortable questions.
Our Advice
Ultimately, business owners who are considering selling their business need to plan ahead, make a decision in regards to hiring professional services or selling privately. In today’s society, we suggest trying to sell your business privately first.
It has been a booming trend over the past 5 years and continues to be the first option for most small business owners.