(Written by David Ferraz, Principal at Argus Business Brokers)
If you are planning on putting your business on the market, you are probably wondering, how do I sell my business, or who should I get to sell my business?
You could sell the business yourself, however, there are a number of reasons that it could be better to use an experienced business broker. These include:
Pricing the Business
If you want to sell your business within a reasonable timeframe, it is essential to price it correctly. If the price is set too low, the business may sell quickly, but you are likely to get a price lower than the true market value. On the other hand, if the price is set too high, there may not be much, if any, interest in the business. An experienced business broker will be able to give you a realistic estimate of the market value of your business, helping to ensure that you maximise the sale price and achieve a sale within a sensible timeframe.
Emotions
Selling a business can be an emotional experience. It is common for both buyers and sellers of businesses to experience moments of frustration, anger, anxiety and irritation. If these emotions are vented on the other side, the deal could fall over. Having a business broker negotiating on your behalf can help buffer emotional outbursts on either side. This, in turn, can help facilitate a smooth, calm, professional and enjoyable business sale process.
Learning on the Job
If you are like most people, you will never have sold a business before, or may have sold a business once or twice in your life. Therefore, opting to sell a business oneself means learning on the job. As typically happens when doing things for the first time, mistakes can be made and lessons learnt on how the process could be handled better in the future.
Therefore, it can be risky to try and sell the business yourself. Doing the wrong thing may mean that good buyers are lost, or not found in the first place. It could also mean that the process can be long, clumsy and deals can fall over.
By using an experienced business broker, you can help avoid a difficult journey and can have a much smoother business sale experience.
Keeping your Eye On the Ball
If you opt to sell the business yourself, this could mean that much of your time is taken up with the business sale process. As a result, less time is available for you to focus on your business and its performance. If this leads to declining sales and profitability, the business may become less appealing to buyers and may decline in value.
Having an experienced broker work on the transaction frees you up to focus on the business. Not only can this help ensure that the business appears good on paper, with stable or increasing sales and profitability, it also means that you make more profit for yourself during the business sale process.
Your accountant is likely an expert at helping you with business financial advice and taxation reporting. They also perform a critical role in the business sale process, especially during the due diligence phase. However, the marketing of your business and management of the business sale process should generally be managed by a business broker. This is because business brokers have databases of buyers plus business sales systems and tools. They also spend all of their working time on business sale transactions and are generally experts at what they do.
When selecting a business broker, it is a good idea to choose one that has experience with your type of business. This will help to ensure that you have a broker who has a database of buyers looking for your type of business and who knows the ins and outs of your industry.
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Before you go further, it helps to understand how the value of your business — including goodwill — is actually calculated.