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For Sale by Owner, or by Broker?

If you’re planning to sell your business, who should sell it? You, a broker or an associate? How do you make that call?

The first question business owners interested in selling often ask is: "How much is my business worth?" Their next question may well be: "Can I sell it myself or should I use a broker?"

That depends on the circumstances. Whether an owner sells the business themselves or employs professional assistance, they will be engaged at some level in the process.

Owners selling businesses with revenues from $500,000 to $25 million generally choose from among these four options to sell their businesses:

1. For sale by owner

If the owner has sold a business in the past, is comfortable making the initial approaches, will not allow selling the business to distract them from running the business, and can achieve their desired outcome, then going it alone may be an acceptable approach.

If the business's appeal is limited only to buyer candidates known by the owner (e.g. a few competitors, financial firms, etc.), then the owner may want to consider selling it themselves. In such cases the owner may make the initial approach, negotiate terms, and use the company's accountant and attorney to draft financial and legal documents.

However, even an owner who knows potential buyers may be reluctant to pick up the phone and tell a competitor that he is thinking of selling. He also may want buyers to compete for his business.

2. Current service providers

Occasionally an owner's current service provider (e.g. accountant or attorney) knows a potential buyer.

In such a case the owner or service provider may take the lead in contacting the buyer, managing due diligence, negotiating, and preparing financial and legal documents.

In these first two options the business owner will need to consider whether or not they can keep the process confidential from employees, clients and competitors and whether they have the free time available to execute the tasks involved in closing the transaction.

If the owner plans to stay with the buyer, then it may be difficult to engage in the tough, sometimes adversarial negotiations required to sell the business and then show up for work as a friendly member of the buyer's team.

3. Local or speciality broker

Local or specialty brokers can bring substantial value to a business for sale, if they are already involved in the industry and have sold similar companies.

These brokers market the business for sale to their data bases of pre-qualified buyers.

They take the lead in executing the many tasks in the process to sell a business and seldom "co-broker" which does limit their marketing to only those buyers that they can identify.

4. Nationally networked brokers

Owners should check out business brokers as carefully as they do the other professionals they hire.

Business owners who interview business brokers will learn that there is a vast range in the capabilities and qualities of brokers.

Good brokers bring a combination of assets to the process, including knowledge of the marketplace, data bases of pre-qualified buyers, proven track records, sources of buyer financing, and relationships with other professionals who can help secure the sale.

The bottom line is, circumstances are different with every business for sale. Owners are best served by considering how much time they can commit to lead the process and their experience level at selling a business, then choosing the option that delivers the most advantageous outcome for their circumstances.

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