Best Way to Sell Your Business
Selling a business is a decision never to be taken on a whim. As a once in a lifetime experience, selling a business should be well thought out and planned for well in advance. This extremely important and potentially life-altering event should be handled by a professional business broker with expertise and experience in business sales. In general, the best way to sell a business involves strategic preparation through compiling a clean set of historical financial records to be reviewed by qualified buyers as well as obtaining a business evaluation by a business broker with experience and competence in selling businesses within the same industry. Using a professional business broker one can trust is by far the best way to sell a business. By using a professional business broker, the business owner is more likely to receive the best possible price and terms while confidentially selling the business without disruption.
Selling A Business ‘By Owner’
- A ‘for sale by owner’ (or FSBO) is almost never a good way to sell a business.
- First, a business must be valued properly.
- Most FSBO sellers do not have their business valued properly because they are unfamiliar with selling a business.
- They often massively overprice their business by using dissimilar comparable sales or methods of valuation that simply are not industry norms.
- Or they undervalue their business by not defining and using the correct adjusted owner benefit (or true economic profits) of their business.
- Most FSBO sellers also do not have an organized and clear set of financials which justify the advertised adjusted owner benefit.
- They will thus be unprepared to engage with a serious buyer who will need to see such financial materials in order to make an offer.
- Lastly, it is nearly impossible for a FSBO seller to ensure the confidentiality of the sales process.
- Without an intermediary between a buyer and the seller, the buyer is bound to know the seller’s true identity prior to signing a Non-Disclosure Agreement (or NDA).
- This can end up causing major disruptions to the seller’s business during the sales process.
Hiring A Professional Business Broker
This first step in selling a business the right way is finding and hiring a professional business broker. There simply is no substitute for experience when it comes to business sales. A business owner should always select a business broker experienced in selling businesses within the industry in which their business operates. The right business broker also must have the know how to confidentially sell a business. This means protecting the seller’s identity from anyone who is not properly qualified (and has completed the NDA). The seller should not face any up front fees, as any reputable business broker only gets paid on commission when the business is sold.
What Does An Experienced Business Broker Do?
A business broker broker will help a business owner determine how much the business is actually worth. Often, business owners assign value to their sentimental or emotional connection to their business, especially if it’s been in the family for some time. These are factors that should seldom be considered. Instead, a business broker will evaluate the business based on its overall financial health, industry trends, market demand, location and other variables. The evaluation may take some time and will involve carefully going over every detail of the business.
Presenting Business Properly and Confidentially
A business broker should collect all of the necessary documentation and financials of the business in order to prepare a confidential listing package. This listing package is only presented to qualified buyers, and should be presented in a way that prompts the buyer to make an offer on the business. The business broker also creates an effective advertising campaign and presentation strategy so that the business is marketed to the correct target audience. This must all be done confidentially in such a way that the business name, address, specific location, and pictures are not publicly revealed. Further, a business broker handles all questions and solely communicates with potential buyers. This saves the seller valuable time and allows a professional to give the proper guidance to potential buyers.
Always Qualify Potential Buyers
Many buyers are not qualified to purchase a business that they see advertised. Nonetheless, they still inquire about the business and seek more information. A FSBO seller is often surprised at the barrage of people who inquire about their business but have no real intention to buy the business or simply lack the financial means to do so. An experienced business broker must qualify every potential buyer by ensuring that the candidate completes and signs an NDA and shows the financial means to buy the business. This will eliminate the ‘tire-kickers’ or buyers who have no real intent or ability to buy the business.
Hire a Business Sales Professional
Selling a business can be a complicated and time-consuming process, one that most business owners do not have the time to handle proactively. While a business owner may excel at running their business, most are better off in letting a trained and local professional business broker handle the sale of their business. Enlisting the help of a business broker will take much of the burden off of the seller and allow for a successful and confidential sale.
If you are ready to sell your South Florida business or create a successful exit strategy, contact Martin at Five Star Business Brokers today for a FREE evaluation of your company.