How to sell a business without a Broker?
(Businesses For Sale by Owners)
If you decide to sell your business without a broker, do you know what you need to do? It is tempting to save the commission but it may cost you more, unless you are well prepared.
Here are some highlights what you need to do!
- Prepare the business for sale. Get all the financials information together, last 3 years of financial statements, leases, list of chattels, list of employees, business plan to be able to provide the buyer sufficient information. Prepare an executive summery showing the strength of the business and show the opportunities for growth. Decide the asking price. Do your homework, check compatible businesses for sale on the market, talk to your accountant, get his suggestions, the buyer will and if you price is not correct you either lose on the deal or not find a buyer, if the business is overpriced.
- Market the business on various classified websites specializing in ads for Business For Sales by Owner Canada or Business For Sale by Owner Ontario, etc., indicating as much information as possible. Keep in mind most people doing Business Search they not sure what they are looking for. Also make sure you do not show the name or the address in the ads you would not want your employees, customers or your creditors to know you are selling. Your name or telephone number in the ad should be masked so readers would not be able to identify your business.
- Schedule, showings, meeting with interested parties, try to find out the buyers’ background, financial situations, experience, seriousness etc. You may have to go through dozens of meetings before you find the right buyer.
- It helps to have a Letter of Intent prepared by your solicitor, outlining what you are looking for and when the buyer is ready, instead of getting a proposal which may be very different what you are ready to accept, you provide it to the buyer when he is ready to proceed. This way the buyer may only need to revise your figures or dates, but the basic conditions or at least the outline of your acceptable proposal is given. Speeds up the negotiations and the process, less chance that the buyer will introduce conditions which you will absolutely not agree to.
- The due diligence period is critical, usually this is the time when the buyer realize what they are getting into, or he may find that the figures are not satisfactory to his expectation. This is why very important to provide the correct figures in your executive summery or in your business plan you provided in the beginning.
- Once your conditions of your due diligence are removed, the landlord has agreed to the lease transfer you ask your solicitor to prepare the closing document.
The above 6 steps looks simple but it could take 6 months before you close the deal. Deals could fall apart for numerous reasons and you need to start it all over. Are you really ready to sell?
The advantages to hire a business broker who will:
- Prepare proper marketing material, business plan, executive summary, etc.
- Evaluate the business and suggest the right asking price
- Market the business to their extensive database of buyers, numerus business sites or on MLS.
- Screen the buyers before introducing to the business
- Prepare, negotiate and explain thoroughly all aspects of the offer.
- Manage all details, prepare and package for financing, explain and negotiate franchise agreement,
- Keep the communications going between the seller, buyer and their solicitors, accountants, landlords, franchisor, bank managers, private advisors, etc.
- Assist with inventory taking
- Close the deal. Saves you headaches, disappointments and time.
- Also it may cost you nothing, an experience business broker should be able to get you a higher price for the business than what you may get on your own, so this would cover the commissions.