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Article
"Business For Sale By
Owner... Or Maybe Not"
By Don Kirchoff
Planning to
sell your business? Who should sell it? You? An associate? A
business broker? How will you make that call?
The first question business owners interested in selling
often ask is: “How much is my business worth?” Their next
question may well be: “Can I sell it myself or should I use
a broker?”
That depends on the circumstances. Whether an owner sells
the business himself/herself or employs professional
assistance, he/she will be engaged at some level in the
process.
Owners selling businesses with revenues from $500,000 to $25
million generally choose from among these four options to
sell their businesses:
1.For Sale By
Owner:
If the owner has sold a business in the past, is comfortable
making the initial approaches, will not allow selling the
business to distract him/her from running the business, and
can achieve his/her desired outcome, then going it alone may
be an acceptable approach.
If the
business’s appeal is limited only to buyer candidates known
by the owner (e.g. a few competitors, financial firms,
etc.), then the owner may want to consider selling it
himself/herself. In such cases the owner may make the
initial approach, negotiate terms, and use the company’s
accountant and attorney to draft financial and legal
documents.
However, even an owner who knows potential buyers may be
reluctant to pick up the phone and tell a competitor that he
is thinking of selling. He also may want buyers to compete
for his business.
2.Current Service Providers:
Occasionally an owner’s current service provider (e.g.
accountant or attorney) knows a potential buyer. In such a
case the owner or service provider may take the lead in
contacting the buyer, managing due diligence, negotiating,
and preparing financial and legal documents.
NOTE: In the first two options above the business owner will
need to consider whether or not he/she can keep the process
confidential from employees, clients and competitors and
whether he/she has the free time available to execute the
tasks involved in closing the transaction. If the owner
plans to stay with the buyer, then it may be difficult to
engage in the tough, sometimes adversarial negotiations
required to sell the business and then show up for work as a
friendly member of the buyer’s team.
3.Local or Specialty Brokers:
Local or specialty brokers can bring substantial value to a
business for sale, if they are already involved in the
industry and have sold similar companies. These brokers
market the business for sale to their data bases of
pre-qualified buyers. They take the lead in executing the
many tasks in the process to sell a business. They seldom
“co-broker” which does limit their marketing to only those
buyers that they can identify.
4.Nationally Networked Brokers:
These are brokers with national and/or international scope,
who work together (“co-broker” transactions) on a
confidential basis to market businesses for sale. This type
of broker is often able to deliver the highest price for a
business by marketing to the largest group of potential
buyers. Nationally networked brokers frequently deliver
multiple offers that enable owners to choose the top buyer.
Experienced brokers manage the sales process so that owners
are introduced only to the best buyer candidates.
Owners should check out business brokers as carefully as
they do the other professionals they hire. Business owners
who interview business brokers learn that there is a vast
range in the capabilities and qualities of brokers. Good
brokers bring a combination of assets to the process,
including knowledge of the marketplace, data bases of
pre-qualified buyers, proven track records, sources of buyer
financing, and relationships with other professionals who
can help secure the sale.
It may be difficult for the owner to achieve the best
outcome without hiring an expert in the process of marketing
a business. A professional broker builds a justification for
premium value and packages the business to achieve the
optimum outcome. In such cases there is absolutely no
substitute for the expertise that a professional broker
brings to the transaction.
The bottom line is this: Circumstances are different with
every business for sale. Owners are best served by
considering how much time they can commit to lead the
process and their experience level at selling a business,
then choosing the option that delivers the most advantageous
outcome for their circumstances.
