Selling your business

It's time to sell your business - go it alone or use a broker?

Every small business owner eventually confronts the issue of selling their business after years of hard work.  It might be that its time to retire, no one else in the family wants to take on the responsibility or it must just be time to enjoy the rewards of all your hard work.  Selling your business can be a difficult and challenging decision.  However, once you've decided to sell the first question to ask yourself is - do you sell the business yourself  or get professional help?

Selling your business yourself

If you decide to sell your business yourself it's important that you go into it with your eyes wide open.  Selling a business is both complicated and time consuming and you need to prepare yourself for the ups and downs.

There are a few key reasons why selling a business is complicated:

  1. the value of a business isn't easily determined
  2. you need to be careful about who knows you are selling your business - if your employees and customers know your firms is up for sale you could lose key people and accounts, and your suppliers may cut back credit terms if they fear they may not get paid
  3. the due diligence process can be time consuming and complex - you have to prove your income and expenses and deal with complex contracts
  4. Buyers often expect to get a bargain if the sale is conducted privately rather than through a broker so you may find that the price people are prepared to pay could be significantly lower than if you use a professional to assist in the sale process
  5. there are a number of landmines that you'll face along the way, even after you agree on a sale price - to name just a couple, you will need to get an asset purchase agreement with all the schedules signed and you will need to provide your numbers in a lengthy due diligence process.

If you do decide to sell your business on your own you will likely spend a few thousand dollars advertising the sale but, on the other hand, you could save more than that by not paying any commissions. Just be aware that it could be a long and complex process.

Using a business broker

Hiring a broker to assist in the sale of a business is very common. Much like you have hired experts to help you with all sorts of areas of your business, SMEs hire brokers to lend a hand in the sale process and to ensure they get the best possible price.

One of the key reasons why business owners seek the help of a broker is because it allows you to focus on what you do best - running your business. If you sell the business yourself the time required to effectively manage this process will force you to take your eye off the day-to-day operations and the drop-off in business could ultimately result in a significant decline in the value of your company.

The reason some SMEs decide to go it alone is because they don't want to pay the broker's fees (most brokers charge a percentage of sale fee). However the decision you need to make is whether or not their expertise will push up the sale price of your business enough to make that fee worthwhile.

It may help to think about it this way.... You are likely to get more for your business if there are a number of prospective buyers. Do you have the contacts and resources to gain that amount of interest? Brokers have resources at their fingertips that allow them to market your business on a variety of web sites, in the newspaper, by direct mail and e-mail and through their various contact networks. With a larger pool of buyers, you stand a better chance of getting your business sold sooner and for more money.

Finally, getting from the point of finding a potential buyer to having a cheque in the bank is a difficult and time consuming process that has many potential points of failure. You'll need all the help you can get to ensure a successful sale. Make sure your accountant, your lawyer and your business broker work together - this is the expert dream team you need to help ensure a successful and painless sale.

 

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