Many people do not know there is such thing as a business broker, or believe they can handle selling their business on their own, so when it comes time to sell their company, they often sell for an amount much less than what the business is worth, or sell to a competitor for unfavorable terms. Some will even simply shut it down, closing the business for no profit at all. It is a shame for business owners and entrepreneurs who make so many sacrifices to run their business to end up walking away with nothing in the end.
In ‘The Real Deal’ podcast on ibba.org, Liz Allen, a small business owner and guest of the show, tells a story of how she tried to sell her business on her own. After failing to do it by herself, Liz recruited the help of a business broker to help sell her business successfully. Liz and her husband felt like they had taken the business as far as she could, and decided that they would have to either close up shop, or merge with another company. After having an initial discussion with a company who was looking to absorb them, they felt like they were already on the right path and could sell the business on their own. She discovered that trying to take that initial conversation and elevate it to serious negotiations was taking her nowhere.
Trying to sell her business to one buyer, Liz started to feel that the buyer knew that they were the only ones she was talking to, and felt that they had all of the bargaining power. She also found that it was difficult to protect her business’s sensitive information. This made it difficult to progress in negotiations, because as an inexperienced seller, she did not know when was the right time to share her business financials and was reluctant to do so. The buyer was making requests that made Liz and her husband uncomfortable, such as wanting to talk to their employees. The process also began to consume a lot of her time. This was time taken away from running the business, which became more of a factor the longer the process was drawn out.
Because of her experience to this point of the selling process, Liz and her husband decided to reach out to their business attorney, who referred them to a business broker. In the interview, she mentions that they realized how much they didn’t understand about the sales process and needed someone to help them deal with all of the intricacies and nuances of the sale. With a broker coaching them through the process, the couple felt much more certain about going into any business negotiations. They knew that had someone on their side who could be a protective force for them.
The broker helped talk them through every step and explained to them how to make dealing with the buyer much more comfortable. It helped to have a buffer between themselves and the buyer who could help protect their confidentiality, but release information to buyers when it was necessary. This wasn’t just confidential information about the business, it was that of their clients as well. Because of compliance issues, divulging any customer data to the buyer was not going to be straightforward. Liz related it to sending a list of leads over to a competitor.
Hiring a broker also helped to put the company Liz was negotiating with on notice. They knew that she had representation and that there could potentially be competing buyers. All of the sudden, it seemed like the buyer was taking them more seriously. They were no longer having casual conversations with one representative from the company. Once Liz and her husband hired a business broker, multiple representatives became involved, all the way up to the top.
After successfully selling her business and being able to look back on the process, Liz could not imagine how she and her husband could have reached the finish line without a business broker. Their business broker dealt with a lot of negotiations, especially when trying to get the most amount of money possible out of the sale. She cautioned those people who might be looking to sell a business on their own, saying that if you tried to sell without a business broker, you would almost have to become a broker in the process, in order to sell the business. She compared selling a business on your own to selling a house on your own, stating that although it is possible, it would be very difficult. Her testimony states that her experience trying to sell on her own was tough with just one interested buyer and she couldn’t imagine trying to do it if she had multiple buyers.
Some business owners choose to work with attorneys to help sell their business by creating contracts and walking them through all of the legal steps to transferring ownership. Liz mentions that attorney fees can be quite high, and whether your business sells or not, you have to pay their consultation fees. A business broker only gets paid if your business sells. While a broker can’t do all the work of an attorney, they can help to minimize the amount of work they to do, by working through some issues and paperwork before submitting it to your lawyer.
Business brokers help provide a buffer between a seller and their buyer, and guidance throughout the process of selling a business. This was the key to Liz’s success story. Her broker was able to provide peace of mind and confidence during the process, saving her time on negotiations, helping her to achieve market value from the sale and protecting her business’s private information in the process. With regards to sensitive information, they helped her to defend what they were able to give or not able to give. The broker, not the buyer, could dictate what, when and why confidential information was divulged. Having sold her business, Liz was able to shift from a small, family owned technology business, towards pursuing a passion project in the arts. This is an opportunity that came about because she was able to sell her business for a profit.
Are you a business owner in Fort Myers, Sarasota, Naples, or anywhere else in Southwest Florida who has thought about selling your company, but you’re uneasy about the process? If you would like to talk to a business broker about selling your business to pursue financial or personal goals, contact Corporate Investment Business Brokers today. We can provide you with a free business valuation to help you decide if selling your business is right for you.