The Business Sale Process Explained by a Business Broker
As a business owner, you may be just like many others who operate small and medium businesses — you will sell just one business during your lifetime, and because that is your first and only sale, you may not know what to expect from the sale process.
Selling your business is complex. Using a business broker to sell your business can help you avoid many potential pitfalls.
A business broker is a professional intermediary between you and a buyer. They handle most of the steps necessary to sell your business. However, to sell your business, you must be intimately involved.
Selling your business is a significant decision that you get the last word on, so understanding the business sale process can help prepare you for those decision points.
An Overview of the Business Sale Process
The business sale process has five stages that encompass several steps. The five stages are:
Retaining a business broker
Valuing and profiling your business
Marketing your business and finding buyers
Negotiating and conducting due diligence
Closing
The process starts with you deciding whether you want to sell your business. Consider researching several business brokers to interview before you know if you’re ready to sell. Selling your business can take 6 to 12 months. You have to feel comfortable about the broker you choose to work with.
The Process to Sell Your Business
You might choose not to work with a business broker. However, if you do work with one, here is what you can expect from the process.
Retain a Broker
Meet with your business broker to discuss every aspect of your business, ask questions, determine whether selling your business is what you want to do, and get on the same page.
Beyond a candid discussion about your business, this stage includes an analysis of your business, industry, and competitors and provides a detailed valuation of your business. If you agree, you can sign a marketing agreement to move forward.
Value and Profile Your Business
To attract buyers, a blind business profile is developed. This one- to two-page document provides enough information to market your business to potential buyers without disclosing your identity. A more substantial overview of your business is also developed to provide to qualified potential buyers.
Market Your Business and Find Buyers
In this stage, a business broker begins marketing your business to bring in qualified buyers. The goal is to sell your business quickly at terms that meet your goals. Potential buyers are screened, financial statements are verified, and buyers are interviewed to determine who might be a good fit to run your business successfully.
Negotiate and Conduct Due Diligence
Your business broker receives offers and negotiates to create a win-win. You are presented with an asset purchase agreement instead of a letter of intent. This helps you fully understand the terms, conditions, and contingencies. Your broker manages the due diligence process with the buyer’s attorneys, accountants, and financial and business advisors.
Closing
This is the final stage of selling your business. The business broker will manage every detail of the closing for you, keeping attorneys and accountants on both sides in sync. Both parties sign all documents, and the buyer transfers money to you.
Your business broker will keep you informed at every step of every stage, and you approve all marketing materials, documents, and agreements throughout the process.
Have Confidence in Selling Your Business
Knowing what to expect from the business sale process can give you confidence and result in the best outcome when you decide to sell your business.
Business Brokers Sell Your Business While You Focus on Operations
In most cases, a business broker is indispensable when you’re selling a company. That said, if you’ve never sold a business before, you might wonder what exactly it is that business brokers handle for you.
The truth is that selling a business is more complex than it looks, and by handling each step of the process, a business broker leaves you the time you need to focus on running your business. Here’s a look at what business brokers do for you behind the scenes.
They Give You a Precise Business Valuation
Business brokers are experts at what they do. They’re intimately familiar with businesses like yours and what they’re currently selling for, so they can create a business valuation that gets you maximum profit while remaining realistic.
They Find the Right Buyers
If you’ve never sold a business before, you might think it’s as simple as placing a listing and waiting for potential buyers to call. In reality, most business deals happen through networking. That’s something you could feasibly do yourself, but this kind of networking can be incredibly time-consuming — especially if you don’t already have promising business contacts.
Business brokers have pre-existing networks of buyers, and they also have the time to seek out new buyers if need be. That’s what they’re paid for! If you let a broker find your buyer, you’ll have more time to focus on the daily grind of running your business.
They Negotiate Deals
Once you find a buyer, you might think that the sales process is almost done. However, this is where it starts to get more complicated. Business brokers handle the back-and-forth between your business and the potential buyer.
Before closing, they generally negotiate a deal that ends up being mutually beneficial. Just like finding buyers, this is a time-intensive process that’s difficult to do when you’re also handling daily operations at your company.
They Keep Things Confidential
It might not seem like keeping a sale confidential has anything to do with running your business. However, if it becomes public knowledge that your company is for sale, that can adversely affect your business. Trying to handle problems that come from that public knowledge while managing the business and trying to sell it would be overwhelming for anyone!
Leave the Sales to the Experts
If you want to maximize your chances of getting a great sale price, you need to make sure your business continues to perform well while it’s on the market (and while you’re in the process of closing a deal). And if you’re the one in charge of running your business, it’s virtually impossible to handle every aspect of the sale yourself while also overseeing the business. Fortunately, there’s an easy solution. When you work with a business broker, you can outsource the marketing, interfacing with potential buyers, and negotiating to someone with experience. When you work together, you have a good chance of getting a fair price — or even better — for your business.