Selling Your Business, FSBO or Business Broker? – From John LaMay
When you are contemplating the sale of your business, give yourself time to gather information and understand those key actions you can take now to enable a successful exit strategy. Business owners know their business, although many business owners underestimate the complexity and risks involved in a business sale.
Most For Sale By Owners (FSBO), tend to either underestimate or grossly overestimate the value of their business while leaving themselves exposed to higher risk. A shrewd buyer can take advantage of Sellers. Many FSBOs who languish on the market with businesses offered for sale well above the actual value, wondering why no buyers are showing up to knock on their doorstep. In the meantime, the employees may start to leave worried about the impending sale, job stability and new management. The Seller is putting so much time and effort into the sale of their business that the business itself begins to suffer, revenue declines, morale suffers, and overall company value drops even further.Selling a business takes planning and up-front preparation time. First, it is important to be realistic about the sale price of a business. The market sets the price. Investing a little time and energy up-front can keep thousands of dollars in your pocket later on. A well-documented business valuation not only takes into account assets and income, but ideally should carefully consider market forces and expectations. Find a firm that is actively involved in the day-to-day business of business sales to provide you some guidance on business valuations. A detailed business valuation will also point out what drives the value of your business, allowing you to shift resources as needed to grow your business value prior to a sale.You may then decide if you wish to handle the sale on your own or hire someone to help you with the sale. Again, knowledge is power. Find out what it takes to successfully sell a business. Talk to your trusted professionals. Call around. The ideal situation would be to find an advisory firm that will explain the importance of confidentiality, a good a controlled process, properly screening for qualified buyers, the importance of thorough due diligence, not only in uncovering what makes your business tick, but also to protect yourself as the current owner from future liability. You don’t want your employees, vendors or competitors to know that your business is for sale until it has changed hands.
As a FSBO be prepared to dedicate 10-15 hours per week to the sale of your business, from advertising, seeking out potential buyers, carefully screening them, understanding tax implications, deal structures, due diligence, negotiations, legal ramifications, as well as continuing to run and complete all of the tasks and duties of operating their business. If these tasks, required expertise, and experience appear overwhelming, then perhaps a FSBO is not the way to go. If you prefer to find a professional firm to handle the actual sale for you, finding a firm that will function in an advisory capacity may be your best bet.
Some groups may want to try to get your business at the expense of overpricing it or telling you that they can sell it in 2-6 months. If you find a firm that tells you what you want to hear and not what you need to hear, than turn around and walk out the door. If you speak with a firm who clearly and realistically presents extensive information and explains your different choices along with the likely outcomes of each, perhaps even telling you something you did not want to hear; stop, listen and ask more questions. Chances are the second firm that explains the options and the different paths open to you and your company may be the right way to go.