Are you a Seller? Make sure you are prepared to go to market.
Be prepared to go to market with your business.
It’s not uncommon for business owners to “test the market” before engaging with a business broker. Some sellers assume that a close competitor will be the natural buyer and therefore they do not need to use an intermediary. Others may underestimate the complexities and pitfalls of the selling process or they hope to avoid paying a success fee to a broker.
If you choose to market the business yourself you need to make sure that you have your business information ready, an effective marketing strategy in place and a system for screening and qualifying interested buyers. The best buyer for your business may be one of the first inquiries—don’t risk losing that buyer because you are unprepared. If you choose to forego an experienced business broker:
- Have due diligence ready. A buyer will rightly assume that a listed business will have basic financial and narrative available upon request.
- Price your business correctly. A mispriced business can drive away qualified buyers or start negotiations off on the wrong foot. Make sure you asking price can be defended with accepted valuation methods.
- Have an open mind to negotiation. Representing and negotiating yourself can be difficult. Be objective and realize that most buyers will not value the “emotional capital” in your business.
- Make time available to meet with a buyer to explain your business. You may need to meet with dozens of buyers before you sell. Each buyer will need hours of your time to ask questions, learn about your business or for you to fulfill due diligence requests. Make sure you understand the time commitment needed so you can be responsive to a buyer!
Some sellers choose to use a commercial or residential real estate broker to list their business. Selling real estate is very different from selling a business! Have them explain their representation policy—many R.E. brokers will represent both the buyer and seller during a negotiation which can create real conflicts in a business sale. Business brokerage relies on confidentiality, valuation and negotiating systems that differ from traditional real estate practices.
While we always recommend business owners use a qualified and competent intermediary to handle their business sale, if you choose to sell your business by yourself make sure you understand the process and are adequately prepared.
