How To Guides

I want to sell my business. Where do I start?

Selling any business, whether large or small is a major decision. Before taking any steps towards selling your business, always consult your legal advisors on the position of the business, the owners/Directors and/or shareholders to ensure any sale does not infringe on anyone's rights. In most cases, any business can be sold however, it is always best to check your legal position as the key decision maker to ensure your intentions are feasible.

Once you have established that you are able to market the business for sale, you need to firstly gauge whether the business holds any value and who is most likely to want to purchase it. In the majority of cases, a business that has a resaleable value will either hold assets in the form of real estate, an inventory, patents or intellectual property; or the business is profitable and making money.

To establish the value of your business, it is advised that you seek a professional valuation of your business. Valuations are usually conducted by professionals such as a business broker or accountant, who will examine your business accounting records and the present trading levels. A great deal of information is required to gain an accurate valuation so in any incidence where you intend to sell your business, it is highly advisable to have your businesses accounts in order and up to date.

Once you have established a valuation, you are ready to start marketing our business for sale.

What is a business broker and how can they help me?

A business broker, also commonly known and as a business transfer agent is an intermediary (or middle man) who will market your business for sale on your behalf in return for a commission on the sale price of the business in question.

Business brokers can help you to sell your business and in cases where you have a good broker working on your behalf, can help you gain a sale faster and for an amount that your business is truly worth. There are thousands of business brokers worldwide so it is highly likely that there are plenty of brokers in close proximity to your business. Many can be found by using our website. To find a broker, try our directory to search for a broker local to you.

What does a business broker do to sell my business?

Typically a broker will help value your business, market your business for sale and eventually find an appropriate buyer of your business. This is a very simplistic breakdown of what a broker does and behind the scenes, a lot of work is done to effectively market your business for sale to buyers who are looking for an acquisition such as your business.

A good broker should always visit your business premises to evaluate the company, how it operates and to fully understand the business prior to marketing it for sale. A business broker will also expect to have sight of your accounting records to aid the process of valuing your business. Some brokers will also take photographs of the business operations, products or services and the premises.

Once they have gathered enough information, they should be able to offer a solid and realistic valuation of your business, taking into account your competition, current market conditions, profit and loss figures and goodwill. It is at this point that you should decide whether your business is worth selling - many businesses are undersold due to pressures or on the flipside, are marketed at overinflated asking prices, leading to disappointment.

Remember, a broker will expect to receive a significant amount of commission from the sale of your business, usually in the form of a fixed rate percentage. Therefore you are advised to get a second opinion on the value of your business to make a sound and informed decision on the price to market the business. The price that you market your business for sale is ultimately your decision so if you are unhappy at any valuation, you are entitled to raise your concerns.

If you are satisfied with the valuation and the terms of the sale using your selected broker, they usually draft a sales information pack which details your business for sale, the asking price along with any sales, profit and loss figures. You are not at liberty to disclose any financial information on any sale of a business. In fact many brokers choose not to disclose any asking price or financial information to weed out time wasters, however remember that any non-disclosure can also put off buyers. It's a balancing act that you will need to decide on.

Most reputable business brokers have a good pool of business buyers registered on their books. From this pool of buyers, they may be able to find you a buyer faster than expected. However, in most cases it can take a long time to sell a business so patience is required. Many businesses take months, if not years to sell.

How does a broker go about valuing my business?

Any broker you choose to use should carry out a full valuation of your business, with detailed due diligence by having sight of your accounting records. After studying how your company has operated over recent years, they will get a greater understanding of the value of your business. You will most likely be asked questions about your business, your customers and how well your business is presently operating.

Other valuable assets such as real estate, your inventory, patents or intellectual property will contribute towards the value of the business. But most importantly is the profitability. If a business is actually making money, it will naturally be more attractive to buyers.

Sometimes business owners are disappointed at the values they receive as they have a sentimental attachment to the business which has clouded their judgement. In other cases, businesses owners receive a valuation that goes way above their expected valuation. If you are unsure in any case, get a second opinion. An accountant is a good alternative who will know exactly how to examine your accounting records thoroughly and offer you another valuation. Then you can compare the two and make an informed decision.

How do I select the right business broker to sell my business?

Like any situation, make sure that you make an informed decision. It is not necessary to sign a contract with the first broker you meet. Each and every broker will have a differing set of terms and conditions so make sure you read and fully understand what you are expected to commit to. Unfortunately, there are some aggressive sales techniques being used by some firms of brokers, who try to push business owners into a hasty decision to sign up based on promises of a quick sale, only to find that little if nothing has been done to market your business.

Worse still is that some brokers expect an up front fee that can be in the thousands. If you are faced with a broker asking for money up front, you are fully within your rights to question their intentions and refuse their services. If you are being pushed and pushed, it is likely that the broker is not interested in selling your business but simply wants to make a fast buck.

Seeing it could take weeks, if not months to get any progress in the process of selling your business, there is no rush to sign up a broker straight away. Do your research, meet as many brokers as you can and when you feel you have a broker who is offering a professional, friendly and affordable service, that's when you may just realise you have the right firm of business brokers on board.

How much will it cost to sell my business using a broker?

Most brokers will charge a fee based on a fixed rate percentage of the final sales figure. There are also some brokers who expect to receive fees up front. No two brokerages are the same so you are advised to read the small print and all terms and conditions before signing anything! Many business owners have been left with a huge bill and no sale after hiring a less than professional firm.

In most cases, brokers are very professional and friendly people so it is highly unlikely you will have any problems. However, you are advised to be vigilant and selective in your process of choosing a broker to market your business for sale. Sellign a business is a timely and costly process so you will most likely only get one shot at choosing the right broker. Take your time, do your research and ensure you are satisfied with the service you will receive.