16 September 2024: Selling Your Business Yourself – and Why You Shouldn’t
Selling your business will likely be the most significant financial event of your life. It’s so significant that it amazes us how many business owners try it.
Given the stakes involved, hiring professionals is not just advisable but crucial to ensuring a successful transaction.
WHAT WE’RE LOOKING FOR: Home and Consumer Services, Health Care : Revenue >$3M. Location: Philadelphia and Greater Washington, D.C.
in**@Wo**********************.com
Selling a business is a significant and multifaceted undertaking that involves numerous complexities, from valuation and legal considerations to financing vehicles and tax avoidance.
This post is an exploration of some of the issues that should convince you that enlisting professional help is essential when selling your business. If you’re not proficient in each of these talents – and if you can’t devote the time necessary to carry out the work of each while continuing to run your business – hiring the pros is the only way to realize the best and highest value of your business and to do so within a reasonable period of time.
Let’s get started.
Accurate Business Valuation
One of the first and most critical steps in selling your business is determining what it’s worth in the current market.
Business valuation is a complex process that involves analyzing financial statements, market conditions, and industry trends. Professionals, such as certified business brokers, business appraisers or valuation experts, bring the expertise needed to provide an accurate and objective valuation. They use sophisticated methods and models to assess your business’s worth, which is crucial for setting a fair asking price.
An accurate valuation helps ensure you don’t undervalue your business or scare off potential buyers with an inflated price. In the first instance, you’ll leave money on the table. In the second, your business may never sell.
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Strategic Positioning and Marketing
Once you have a valuation, the next step is to position your business effectively in the market.
Professional business brokers and M&A advisors are skilled in creating compelling marketing materials and identifying the right buyer pool. They understand how to highlight your business’s strengths and growth potential, which can attract serious buyers.
These professionals also leverage their networks and marketing channels to reach potential buyers who might not be accessible through conventional methods. Proper positioning and marketing can significantly impact the speed and terms of the sale.
Negotiation Expertise
Negotiating the sale of a business is often the most challenging part of the process. Experienced negotiators, such as business brokers or M&A advisors, can play a pivotal role in securing favorable terms.
These professionals understand the intricacies of negotiation tactics and can handle discussions related to price, terms, and conditions, ensuring that your interests are best served. Their experience allows them to anticipate and address potential objections and challenges, which can be crucial in achieving a successful outcome.
Legal Considerations
The legal aspects of selling a business are extensive and can be daunting for those unfamiliar with legal procedures. Hiring a transaction attorney is essential to navigate the complex legal landscape, including drafting and reviewing contracts, ensuring compliance with regulations, and handling due diligence.
A skilled attorney can help avoid common legal pitfalls, such as overlooking critical contractual clauses or failing to comply with disclosure requirements. Their expertise ensures that the sale is conducted legally and protects you from potential legal disputes or liabilities.
Tax Implications
Selling your business can have significant tax consequences, which can vary depending on how the sale is structured.
Tax advisors or accountants specializing in business transactions can provide valuable insights into the tax implications of the sale and help you devise strategies to minimize your tax liability. They can help you undeerstand how different structures, such as asset sales versus stock sales, impact your tax situation.
Selling your business requires proper tax planning. It’s essential to maximizing your net proceeds and ensuring that you’re not caught off guard by unexpected tax liabilities.
Financial Due Diligence
Financial due diligence is a critical part of the sale process, where buyers thoroughly examine your business’s financial records and operations. Having a financial advisor or accountant involved can help prepare your business – and yourself – for this scrutiny.
They can ensure that your financial statements are accurate, up-to-date, and well-organized, which helps build trust with potential buyers. Moreover, they can assist in addressing any financial issues or discrepancies that might arise during due diligence, smoothing the path to a successful sale.
It’s also important that you perform some financial due diligence on the buyer. Does the buyer have the horsepower to pull the trigger? Are you dealing with a tire-kicker? Worse, is the buyer really working for a competitor trying to get some competitive intelligence?
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Courses! Courses! Courses!
Many of you have asked if our Flagship Course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, could be made available on a module-by-module basis. We’re happy to report that this is now possible.
We’ve broken our Flagship into six separate modules (or module groups) to give you all the flexibility you need to learn only what you want to learn – and we’ve moved them all over to the new Brokers Academy in The Brokers Roundtable℠ . The Flagship is still available but the modules are now available individually.
You don’t need to be a Member of The Brokers Roundtable℠ to access any of these courses but if you are, you’ll receive a 20% discount on the cost of any course you enroll in. If you’re not yet a member of The Brokers Roundtable℠, you can learn more – and get access to all the talent and resources – here.
Confidentiality and Discretion
Maintaining confidentiality throughout the sale process is crucial to prevent any negative impact on your business operations, employee morale, or customer relationships.
Professional business brokers and M&A advisors are adept at managing confidentiality. They ensure that sensitive information is disclosed only to serious, vetted buyers and that the sale process does not disrupt your business. Their experience in handling confidential transactions helps safeguard your business’s reputation and operational stability.
Handling Complex Transactions
The sale of a business can involve complex proceedings, including financing arrangements, earn-outs, price allotments and equity rollovers. Professionals, such as business brokers with CBI credentials and M&A advisors, are experienced in structuring these often complicated deals to meet both your needs and those of the buyer.
They can navigate the complexities of financing arrangements, ensure that all terms are clearly defined, and help manage the intricacies of integrating or transitioning the business post-sale. Their expertise ensures that the transaction proceeds smoothly and that all aspects of the deal are handled efficiently.
The Bottom Line
In our nearly quarter century advising business owners, we have numerous files of business owners coming to us after trying for many months – and sometimes years – to sell their own business only to have waster all the time and money spent in the process and realizing that the time they spent was time that was taken away from running and growing their business. Because of this wasted time – spent on something they were not skilled at – the value of their asset suffered.
Selling your business yourself is tantamount to replacing your own knees. Neither is likely to be successful. But the financial impact of the former is likely to be significant; so significant, in fact, that it’s amazing some owners try.
For a successful sale at a price that reflects the business’ value, get the professional involved; and do so early on.
I’d like to hear from you. What topics would you like me to cover? How can we tailor these posts to be more useful to you and your business. Let me know in the comments box, below, or email me at
jo*@Wo*******************.com
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If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
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The author is the founder, in 2001, of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 600 in the world. He can be reached at
jo*@Wo*******************.com