How To Sell A Small Business Without a Broker
I sold my company some years ago, paid too much money to a business broker, and got poor results. It took over a year to close, and I didn’t get the money I deserved. This experience led me to share my story and help friends and colleagues sell their businesses without a business broker.
Systematic Approach
I created a systematic approach using technology and social media while keeping the sale secret how buyers find business opportunities has evolved and changed like most things. What worked a few years ago no longer works due to changes in technology and buyer behavior. The approach I am describing here is not for every business. Some businesses will require professional help because of complexities associated with the business, industry, market, or other factors.
Technology Has Changed How Businesses are Sold
Properly Preparing a Business For Sale
This conclusion was reached by my own bad experience selling businesses and the desire to make selling a company easier and less costly. It is reported that most small businesses offered for sale never sell. This is because some components are not adequately prepared, and there is no systematic approach.
Maintaining Secrecy at Every Step
The most important part of the process is to keep the sale secret while getting your company maximum business exposure to buyers. Employees, customers, and vendors should never know your business is for sale until the deal is done. It’s important to have realistic expectations and know that it will take considerable time to get your company sold.
Suggested Approach
The approach I suggest includes market analysis and the necessary components for a successful transaction. You need to know the best price to sell your business without leaving any money on the table. A systematic approach is important if you want to sell your business without a business broker. It is also important that your business is properly marketed to the largest audience of buyers possible. You must be able to show your company’s benefits to a new owner. Sometimes a complicated transaction requires a business broker or professional help, but you know your business better than any business broker and are likely the most qualified to sell it.
First Things to Do When Selling a Business
The Why “Am I Selling My Business
The first step in selling a business is making the determination you want to sell. There should be a good reason to sell your company, so you don’t have regrets later. If your “why” is not strong enough, you probably will not have the will to do everything necessary to get your best deal. Don’t cheat yourself and sell too soon. If you still have the desire and the means to improve the business, you should do so. The better you can make the business, the more you will be rewarded upon your exit. Also, don’t hurt your business by staying too long and letting the business decline. This is not an easy decision, and your “why” should be clear to you when the decision is made.
Professional Business Valuation
The first step in selling a business is to know how to price the business for sale. No one will make an offer on your business if the price is too high. If your price is too low, you will leave hard-earned money on the table. There are several valuation methods, some based on the balance sheet, earnings, projections, equipment, intellectual property, comparable sales, and more. Seller’s Discretionary Earnings Method, Comparable Sales Method, and Multiple of Sales are the most appropriate for most small businesses. You will need the right data sources and proper financial documents for an accurate business valuation.
Marketing Materials You Need to Sell Your Business
Comprehensive Business Review (CBR)
This key document contains all the financial information about your business. Its sometimes referred to as a Confidential Information Memorandum (CIM). The document describes how the business operates, its customers, equipment, pictures, etc. Consider it a virtual tour of your business that will be an expectation by any serious buyer. Buyers will not seriously consider purchasing your business if you fail to produce a CBR. You may be forced to accept a lower sales price if you don’t have a CBR. You can see a sample CBR here.
Adjusted Cashflow
The adjusted cash flow statement is the document you can’t afford to have if you want to sell your company. The adjusted cash flow statement should show three years of financial data that tax returns can support. It’s called adjusted because adjustments are made for discretionary expenses, depreciation, amortization, interest expense, non-recurring costs, taxes, and other special expenses. Learn more about how this calculation is done here.
Keeping The Sale of Your Business Secret
Communicating with Buyers by Gmail
The first communication you will likely have with a buyer is by email. Set up a free Google Account which gives you free access to a suite of free Google services. The services include Gmail, Google Docs, Google Sheets, Google Voice, and much more. After you sign up for a new Google Account, get a Gmail Account. This email will keep all your buyer leads and communication separate from your regular email and let the discussions be secret until you have a signed non-disclosure agreement. Choose an Email name that does not describe anything about you or the business. The idea here is to be anonymous until an NDA is signed.
Communicating with Buyers with Google Voice
You will also need a Google Voice account which is one of the services included in your Google Account. All Google Products are assigned to this account which makes a convenient way of staying organized during the process of selling your business. Select the free “personal account” with a local number. Google will give you a list of numbers, and choose the number you want. It doesn’t matter which number you choose if it’s an area code that is common to your area. This will allow you to get a free phone number that you can forward to your regular phone line.
Non-Disclosure Agreements
Get an online signature program like signNow which allows for sending non-disclosure agreements by email. The NDA is added to sign now as a template and can be sent out as often as possible with just a few keystrokes. After you send the NDA to a buyer for signature, sign now will send you a confirmation email with the signed form. This greatly speeds up the process and keeps digital records of the signed agreements. It is recommended not to share confidential information about the business with buyers unwilling to sign an NDA. Keeping the sale secret is important to protect the business.
The Process of Selling a Company
Buyer-Seller Meetings
Buyer-Seller meetings should only be done after you have an executed NDA and the potential buyer has received the adjusted cash flow statement and CBR we provided for you. In addition, “Buyer-Seller Meetings” should be done before or after working hours. It should be done when few or no employees are around. The buyer will expect a physical tour of the location and an explanation of your company’s products and services. Many questions will already have been answered from their reading of the CBR. You can expect the buyer to learn a lot about you, which is good. People buy businesses from people they like and trust. Be very forthcoming and don’t oversell.
Staying Organized
You may have many conversations throughout selling your business. You will want to use a tool like Google Docs or Google Sheets to record the names, phone numbers, and emails of the people you talk to. A potential buyer you talked to weeks or months ago will call to continue the discussion about your business, and you may have no recollection of who it is. Above all, use the tool you are comfortable with as long as you can keep records of the people you talk to about your business.
Letter of Intent/Purchase & Sale Agreement
Letter of Intent (LOI) and Purchase & Sale Agreement are being discussed together because every deal is not the same. Some transactions go to a Purchase and Sales Agreement and skip the LOI altogether. It has much to do with the buyer’s sophistication and information. A buyer with less information is more likely to offer the non-binding LOI. A buyer in a competitive situation may opt for a Purchase and Sale Agreement first if there is a threat; he could lose the deal to another offer.
How To Market Your Business for Sale
Marketing your business on the biggest business-for-sale websites is necessary to sell your business in the least amount of time. In conclusion, you must list your business on multiple business-for-sale websites to get the most money. Bizbuysell.com and Bizquest.com are the two biggest websites for selling a company, and your business needs to be on these sites for a successful transaction. As a minimum requirement, you also need the necessary financial documents, including an adjusted cash flow statement and balance sheet. A CBR and a business valuation should be done so you know exactly where to price your business.
How To Price My Business For Sale
After you know the why “am I selling my business,” you must know the right price to list your business. You may learn that the price your business will sell for is less than you are willing to accept. In this case, you improve your business until your company is worth what you are ready to take. Get more information about selling your business without a broker by clicking the button below:
