Selling your business is one of those things you can't do alone.
You need help preparing your sale offering, marketing your business, producing financial and other documents that buyers require, and completing the legal papers that protect you, your business, and your buyer after the final handshake.
Here's a glance at the sale process and where advisors fit in:
Every business sale involves a team, though the team players vary depending on the nature and complexity of your sale and your personal ability and willingness to devote significant personal energy and time to the effort.
Here are the steps to follow as you decide who to involve.
Step 1. Decide who you want on your business-sale team.
Some business owners handle the process of selling their businesses with assistance only from their attorneys and accountants, who are the two key players on every business team. Others require assistance from appraisers, business brokers, and business consultants.
The following questions help guide your decisions.
DO YOU NEED...
YOUR ANSWER IS LIKELY TO BE YES IF...
An appraiser or valuation expert?
Your business involves intellectual property, proprietary processes, brand awareness or other assets that are difficult to value and price
Your selling price could be significantly higher if you implemented major business improvements beyond the expertise of you and your management team
Your likely buyers are difficult to target and reach; you don't have time to run your business while trying to sell it; you're not the best person to market, present and negotiate the sale of your business.
Step 2. Determine whether or not and how to hire a business broker.
If you decide to market your business on your own, your offering is considered "for sale by owner" or FSBO (fizbo), which is an increasingly popular sale route given the tremendous marketing exposure offered through business-for-sale websites.
Even if you can go it alone, however, it doesn't mean you won't benefit greatly from the involvement of an intermediary who can help you market to and screen buyers, present your business offering, and guide the negotiation and closing process.
Among the good reasons to hire assistance, consider that professional intermediaries provide the following benefits:
They allow you to run your business while it is being marketed for sale.
They can be a good buffer between you and the buyer.
They can handle the flow of documentation.
They have done it before and have likely dealt with most challenges that can arise.
When hiring an intermediary, be aware that businesses worth more than several million dollars usually seek mergers and acquisitions (M&A) specialists, and smaller businesses work with business brokers.
Use the following form to record answers from broker interviews:
Questions to Ask Brokers
Length of time in business?
Full time or part time?
Independent or part of a broker group?
Certifications: Are they members of the IBBA (International Business Brokers Association), designated with a CBI (Certified Business Intermediary), or members of other state business broker associations?
Number of annual listings?
Number of annual sales?
Average sale price compared to asking price?
Experience with businesses similar to yours?
Broker's site traffic?
Number of buyers in broker database?
How your business will be priced?
How your listing will be marketed?
How broker uses online business-for-sale listing sites, and which ones?
What is the broker's fee? (usually 10% of purchase price or a pre-set fee, whichever is greater)
Does the broker charge a cancellation fee if you withdraw the listing; or a trailing fee if after the listing expires you sell to a buyer referred by the broker?
Does broker allow carve-outs or exclusions that reduce fees if your business sells to a person you named as a potential buyer at the time of the listing?
Will the broker provide names and contact information so you can interview past clients?
Step 3. Contact business appraisers or valuation specialists if your business is difficult to price.
Business appraisers differ from real estate appraisers in a number of ways.
If you're seeking advice on the value of the real property of your business, turn to a real estate appraiser. For help valuing your entire business, you'll want to seek advice from a business appraiser, and preferably one with a professional designation from a reputable and recognized trade association. Look for an appraiser with one of the following credentials:
CBA/Certified Business Appraiser
ASA Accredited Senior Appraiser
CPA/ABV Certified Public Accountant Accredited in Business Valuation
CVA Certified Valuation Analyst
CBV Chartered Business Valuator
Search online and seek industry advice for qualified appraisers in your business field, or ask your attorney or accountant, who may be able to refer you to trusted, experienced appraisers in your industry or market area.
Step 4. Remember, confidentiality is key during the sales process.
Customers, competitors, employees and creditors all will have different reactions if they learn that your business is for sale. Even buyer prospects often react negatively to a business opportunity that has not been kept confidential.
Even before dealing with buyers, remember to obtain confidentiality agreements when dealing with sale advisors and other confidants. Otherwise you risk disturbing the confidence of your staff, suppliers or customers, which is the last thing you want when you're working to keep your business strong for a potential sale.
In next week’s installment of “Selling Your Small Business” we’ll help you with the all important task of pricing your business.
Editor’s Note: This article is the eighth piece in a series taken from BizBuySell.com’s Guide to Selling Your Small Business. The guide is a comprehensive manual to help small business owners maximize their success when the day to sell arrives. Each Wednesday, Inc.com will publish a new section of the guide outlining BizBuySell.com’s best practices, from the initial planning stages of a sale all the way through negotiations and post-sale transition.