How to Sell a Small Business Without a Broker
Factors like your efforts, time, and money invested in setting up your venture play a significant role when you decide to sell your business. After all, it is a complex process that affects your professional and personal life.
Although no fixed criteria help business owners decide when to sell their venture or withhold their decision, a few things must also be considered.
Firstly, analyze the dynamics of your business, and finalize whether your business is in the selling position. Irrespective of how difficult it is to decide to sell your business, you must diligently think through the process. On top of that, there are several benefits beyond making a profit.
Let’s look at some of the benefits.
Starting your business from the ground takes tons of money, and business selling is an easy way to gather funds for a new start-up. Selling your business is a pathway for business owners to invest in something new. The money earned can be strategically invested in projects that reflect growing industries.
It would be best if you remembered that selling during a high period of good business will benefit your business financially. So, thoroughly monitor the market to avoid a costly loss.
Besides the professional point of view, business owners might want to explore their new interests, and selling the business is the ideal way to do so. Moreover, doing so likely opens doors for your business to attract buyers, which benefits you.
Here is a guide on how to sell a small business without a broker.
Tips on how to sell a small business without a broker
After deciding to market and sell your business on your own, consider the following steps.
1. Gather financial records
The most critical step in selling a small business without a broker guide is analyzing your business’s financial position. In addition to that, gather all the financial records to help correctly estimate the business’s value.
Your corporation’s financial affairs must be in order so the potential buyer faces no issues while reviewing the documents with their CPA. The processing phase passes ahead of the sale by ensuring your buyer has all the information they need.
Some key documents the buyer is likely to view include balance sheets, financial statements of the last few years, and federal tax returns; after the offer is finalized, a 30-day due diligence period begins, during which the buyer thoroughly reviews all documents. Maintaining records saves time when transferring ownership of your business.
That said, working with a CPA is recommended to organize the documents in a buyer-friendly manner, thus keeping everything ready.
2. Determine your business’s worth
If you are still trying to figure out how to sell a small business without a broker, consider going for an official business appraisal. The process is time-consuming, but you can come up with a reasonable estimate.
The benefit of determining your business’s worth is that you’ll understand the appropriate time for getting a reasonable price from the buyer. Among the commonly used strategies is using online business valuation websites.
These websites ask for information like the current revenue stream and the company’s assets and liabilities. Based on this information, the valuation calculator tool estimates the value.
However, if you find evaluating your business a bit daunting, consider consulting a firm that doesn’t require hiring a broker.
Among the critical things to remember is that regardless of your estimation efforts, the buyer has the upper hand in deciding what they are willing to pay you. The amount is usually less than your estimated value, so negotiate the amount reasonable to you.
3. Keep track of market trends
Several factors are significant when stuck between selling or holding a business. One of those factors is the market trends that offer insight into the competition, policy changes, and global events that impact your business.
One of the simplest ways to monitor the current market trends, especially if you want to sell a web-based business, is by using the tools like Google trends. Keeping an eye on the market trends gives business owners ample time to make a final decision.
The benefit of market trend analysis is that you anticipate the customer’s needs. It helps clarify whether your business is serving the purpose it promised or whether starting a new venture that adheres to customer needs is better.
Practical experience and knowledge-based information greatly help fully understand how to sell a small business without a broker.
4. Qualify Potential Buyers
Apart from professional, personal sentiment is attached to your business, and rightfully so. You invested a chunk of your time, money, and efforts, so seeing it get wasted is not what you want. That is why it is critical that you thoroughly review the potential buyers.
You owe it to your business that it ends up in the hands that will successfully keep it running. There are several tips you can follow when deciding upon a potential buyer. First, start by narrowing down the type of buyer you are looking for.
Deciding on the type of buyer you want helps transfer ownership of your business at a higher price. The most effective way to ensure your business doesn’t fall into the wrong hands is by asking buyers about their experience. It is essential because the deal is likely to fail if you suddenly find out the buyer lacks the skill set.
You can also verify the potential buyer’s information for peace of mind. For example, a professional buyer will provide copies of their financial information, licenses, and other relevant documents.
It is always better to ask your buyers to sign an NDA before disclosing sensitive information about your business.
5. Negotiate and Finalize
Now that you have all the answers to selling a small business without a broker, the next and last step is to negotiate and set a final sale price.
One thing you must always keep in mind is that price is not everything. Be sure to ask about the employee’s and senior management’s future. These elements must be a part of the negotiation process.
Though this suggestion might be the first one you have heard, as per studies, a first-named price significantly influences the figures in a negotiation. The strategy benefit’s the seller if they have an information advantage over the buyer. Otherwise, playing coy is the go-to route when trying to avoid lowballing.
The negotiation deals must be carried out in a definitive agreement. It is an official document that oversees the purchase and sale detail.
The decision to sell your business is challenging, but sometimes it has to be done to start something new with better prospects. Reasons like personal interest or financial loss are common when business owners have to think about their venture’s future.
If you don’t want to get into the trouble of hiring a broker, there are numerous things to consider. Gathering all financial records, qualifying potential buyers, and keeping track of market trends are critical tips if you decide to sell your business independently.