How to Sell a Small Business Without a Broker

Selling Your Business Yourself

According to the experts at UK-based business brokerage, selling a business yourself is a better option than going through a low-quality, low-cost, or inexperienced brokerage firm. More than 90% of businesses that go through these firms never get sold, but if you do it yourself, you’re more likely to get a good price, and you’ll get more potential buyers competing for your business.

A business broker’s primary goal is to sell their client’s business. However, as a business owner, you know more about your operation than anyone else. You’ve worked hard to build it and hire the employees who keep it going. That’s why it’s important to find a potential buyer who appreciates and cares for your legacy. Unfortunately, some brokers are only interested in their commission, so it’s up to you to make sure the company you worked so hard to create will be in good hands.

To ensure that they remain in control of the process, business owners should do market research to set their prices, do their own marketing, deal with buyers themselves, and hire their own attorneys and accountants.

You can avoid having to wait on hold, and you can customize the deal to your liking.

As the owner of the business, you are responsible for any failures that occur during the sale process. However, you have already accomplished so much by building your own business and deciding to sell it. A few more responsibilities should not be a problem.

How to Sell a Small Business: A Brief Overview

The first step to selling your small business is asking yourself: Is now the right time?

Some small business owners may find themselves in a position where they have to sell their business. This could be for a variety of reasons, such as health problems, a lack of passion for the business, or new interests outside of the business. Additionally, the owner may be holding the business back, lacking a transition plan, or facing disagreements with partners. If you find yourself in any of these situations, it may be time to sell your small business.

If you are thinking of selling your business, Investopedia offers some things to consider. First, ask yourself why you are selling. Consider the timing of the sale and get a business valuation to estimate its worth. Find a broker you trust and be sure to have all the appropriate documentation prepared. Find a buyer and handle the financial components of the sale.

The business owner needs to make sure their financial records and operations are in order once they have decided to sell. They should make sure all their paperwork is up to date and their business is running smoothly. This will help make the sale process go as smoothly as possible.

The National Federation for Independent Business provides a comprehensive guide for preparing for a sale that emphasizes pre-qualifying a buyer and preparing an exit strategy in advance.

Over the last two decades, we have come up with a simple way to determine whether or not a company is prepared for a sale.

How to Sell a Small Business without a Broker

We believe that hiring a qualified and experienced brokerage is in most business owners’ best interests when selling their business.

Small business owners, however, can successfully sell their businesses without the help of a broker.

These situations usually fall under a few categories:

• The business owner is approached directly by a buyer.
• The business is being sold to a family member.
• One business partner is selling to another partner.
• There are a few motivated buyers for the business.
• The business owner feels that they are the most qualified to sell their business.

If you find yourself in any of the above situations, you may be wondering if you can sell your small business without a broker. The answer is: maybe!

Here are the pros and cons of not using a broker when selling your company.

Pros of Selling a Small Business Without a Broker

The main benefits of not using a real estate broker when buying or selling a business are that it is usually less expensive and it gives the business owner more control of the process.

It saves you money

A business owner can avoid paying a broker’s fee by handling the sale themselves.

Regain control

Small business owners are often used to being the only ones who make important decisions for their businesses.

Some small business owners feel uncomfortable relying on a business broker to communicate with potential buyers. They may feel like they are losing some control over the situation. Ultimately, the business owner knows their business best and should be comfortable with whomever they choose to help them sell their business.

Avoid misaligned incentives

Like in selling a house, a realtor has an incentive to close a deal so they can get paid. A deal that is bad for the buyer can be good for the real estate agent.

Working with a broker eliminates the possibility that the broker does not have your best interest at heart and guarantees that the realtor has your best interest at hand.

Choosing a bad stockbroker can cost you both money and time.

Cons of Selling a Small Business Without a Broker

The biggest disadvantage of not hiring a broker is that you will have to do it all yourself, including finding potential buyers, negotiating a price, and taking care of all the legal work. You will also have no access to experts who can guide you through the process.

Casting a narrow net

A business broker can help to create a broad market for your business by identifying and communicating with many potential buyers. This gives you the best chance of getting the highest possible price for your business.

Without the support of a business broker, a small business owner may limit the number of potential buyers. This could result in less interest in the sale of the business, and ultimately, a lower selling price.

No network of experts

A successful sale process involves the input of a variety of specialists, including a business broker.

Without a business brokerage, business owners will need to hire their own team of advisors, such as tax accountants, lawyers, and financial planners.

Need more research

Business brokers typically provide sellers with advice on business valuation, desired terms of the sale, and what to expect in the market. This information is meant to help the seller make an informed decision when selling their business.

Selling a business without the help of a broker can be difficult and time-consuming. The seller will need to research the market and learn about business valuation and required terms of sale. Without this knowledge, it may be difficult to sell the business at a fair price.

No buffer

Making sure that the seller and buyer have a positive relationship is essential for getting the transaction done, especially if the seller will continue to work with the buyer after the transaction is completed.

A business broker can often play the role of the unpleasant person who mediates a sale between a buyer and a seller.

Significant effort required

Most business owners will only sell their company once. They are not experts in selling a business.

Without the help of a broker, selling your business will take a significant amount of your time. You’ll have to search for possible buyers, prepare a summary overview of your company, and meet with interested individuals.

The time and focus spent on the sale process can take away from the owner’s ability to run the business effectively.

10-Step Guide to Selling Your Business Without a Broker

If you’re thinking about selling your business without a broker, here are 10 steps to help you through the process.

1. Get a Business Valuation

If you haven’t had a valuation of your business done before, now’s the time to look into it. Having an idea of how a buyer values your company will give you a leg up when it comes time to sell.

It’s not necessary, but it’s recommended to get a professional valuation of your company before trying to sell it.

A business appraisal can help you determine a fair selling price for your small business. It will also help you negotiate a fair price with potential buyers.

A small business valuation can determine how much your business is worth before selling.

2. Talk to Your Attorney and CPA

Make sure to let both your accountant and attorney know if you plan to sell your company yourself. That way, they can prepare themselves for any requests that may come their way from potential buyers.

You should review your annual tax returns and your most recent financial statement. Make sure that they are in the best possible shape, and that you are aware of any taxes that may result from the sale.

It’s important to have urgency when drafting and agreeing to a letter of intent (LOI). Your attorney should discuss with you what terms are non-negotiable, what types of diligence are appropriate, and what earn-out, representations and warranties, covenants, closing conditions, and indemnification mean.

If you’re not careful, time can kill your deal. Make sure you keep the momentum moving forward to avoid any delays.

Lawyers and accountants are often busy people with court dates and IRS deadlines, respectively.

You need to show respect for their time, but you also need to remind them that the deal will only move forward if certain expectations are met by both parties. It’s a difficult balance to strike.

3. Prepare Your Business for the Sale Process

If you want to be successful in negotiating a deal, you need to be prepared to start from a place of strength and maintain the trust with your client throughout.

Make sure that you’ve gathered all the documents that your buyer’s lender will require during diligence and that your financial records are up to date and accurate.

The valuation of the property, the lending terms, and the terms of the final contract will all be based on the condition of the home’s foundations.

4. Keep the Sale of Your Business Confidential With an NDA 

If you’re considering selling your business, it’s important to keep the process confidential. One way to do this is by having potential buyers sign a non-disclosure agreement (NDA). This will help protect your business interests and give you peace of mind as you move forward with the sale.

When reaching out to potential buyers, be sure to let them know that you are in the early stages of considering a sale and have a timeline in mind. This will help keep the process moving forward and prevent any delays.

If there is alignment between your goals and those of an interested buyer, ask them to sign an NDA before sending any additional information.

5. Create a Confidential Information Memorandum (CIM)

A Confidential Information Memorandum (CIM) is a document you provide to interested buyers that have signed a non-disclosure agreement (NDA). It lays out all the details of your company, including information on your products, services, management, and financials.

It should give them enough information to decide whether or not they want to move forward with buying your company.

You can do it yourself or hire a business appraiser to do it for you for a $500 to $5,000 fee.

6. Buyer Outreach

There are several ways to sell your business, including on popular websites like BizBuySell.com, BizQuest.com, BusinessBroker.net, and Axial.net.

If you’re interested in selling a business yourself, you can Google “sell your business without a broker” to find companies that provide this service.

Sales Navigator is a great way to find potential buyers in your industry on LinkedIn. You can also use it to find other professionals who can help you with your sales goals, such as marketing consultants or lead generation specialists.

7. Sign a Letter of Intent (LOI)

After you’ve successfully found a prospect and worked out the main points of the deal, you’ll want to write everything down in a letter of intent. This will protect both you and the buyer.

Do not let potential buyers do their due diligence before putting in an offer as they may back out. Get a letter of intent (LOI) signed first, then move into due diligence.

Until an LOI has been signed, you’ll want to hold off on negotiating any offers. That way, you can prevent buyers from presenting you with offers that are far below what you’re willing to accept.

The worst thing you can do is to let buyers go through an extensive due-diligence period only to have them present you with a lowball offer.

While an LOI is not legally binding, it is an agreement that is made between the seller and the buyer. This agreement is put in place to show good faith and that both parties are serious about moving forward.

Have your attorney look over the final LOI before you sign it.

8. Enter Due Diligence Phase

The buyer’s due diligence period is their opportunity to request more information about your business. This is their chance to review your financial statements, legal agreements, insurance documents, and more. Be ready to provide them with any information they request.

If a buyer is another company or a private equity group, you’ll want to ask them about their funding sources and who they’ve bought from in the past. This will help you understand if this company is a good fit or not.

If there is a property associated with the sale, you may need a commercial property valuation. There might also be a walk-through of the property with a list of needed improvements from the purchaser.

9. Negotiate and Finalize the Definitive Agreement

The lawyers for both the buyer and the seller will be negotiating with their respective clients.

Your attorney will be working with you closely during this difficult time.

There are a variety of other documents the attorneys will put together aside from the definitive agreement, such as non-compete agreements, employment agreements, and lists of equipment, inventories, and debts.

As the person selling the house, it is your job to make sure everyone involved in the transaction is working towards closing the deal. This means keeping in touch with your buyer and checking up with them frequently to make sure they are staying on schedule.

10. Close and Move Into Post-Sale Transition Period

Your involvement in the company will not end until you have helped with a reasonable transition period.

This transition period will be spelled out in the Letter of Intent and Definitive Agreement. Be prepared to stay on with the new owner for a period of time ranging from one month to one year after the sale is complete.

Conclusion

Now that you know how to sell a small business without a broker, you’ll be on your way to getting the best price for your company. By keeping the sale confidential with an NDA, preparing all the necessary documentation, and marketing your business online, you’ll be sure to attract serious buyers who are willing to negotiate a fair price.