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Business For Sale by Owner

Can I sell my business by myself?

Can a surgeon operate on himself? Can a homeowner sell his own home? Can an attorney defend himself in court?


These questions could all be answered in the same way. It can be done, but that does not mean that it should be done. We hire professionals for very good reasons. First, they are professional. They specialize in an area, and are very good at it. They work in that area full-time, without the distractions that we have from our real jobs. Let's focus on the issues for a business owner to consider before trying to sell his own business without professional assistance.



Expertise

Do you know how to sell your business? If not, there is a lot to learn. Any good business advisor or business broker will tell you that even after years of experience and dozens of successful transactions, they learn every day. Good advisors apply their learnings from past transactions to make future transactions even better. Do you have the time to learn the trade and invent the wheel? Can you afford to risk your livelihood and business, which may be your single largest investment and personal asset? Could you weather litigation or business interruptions if things go wrong?



Counsel

If you decide to go it alone, you should still try to find an educated and experienced sounding board. Just as anywhere else in life, two heads can be better than one. You may need technical advice, or just someone to bounce off ideas. You may need someone else to play the good cop or bad cop in negotiations. Who will that be, and are they up to the challenge?



Confidentiality

One of the major risks in selling your business is that in getting out the word to prospective buyers, it could also get out to the wrong people and cause problems. What if the sale takes awhile, or does not go through? What will your customers think if they find out that you are selling? They might remain loyal, or patronize your competitors instead. Would your best employees stick around if they felt threatened by a change in ownership? If your suppliers find out, will they still offer you the same credit and terms? Would your competitors be supportive, or fuel rumor mills and circle like vultures?



Buyers

Do you understand business buyers? They are a different breed. Some are sophisticated and may try to take advantage of you. But most are new at this game, just like you, and susceptible to making mistakes and having second thoughts. Will you have the time and tools to screen dozens and dozens of tire kickers? How will you qualify them? It will be important to ensure that unqualified buyers do not examine your business details and waste your time. Think about how you will keep buyers and their inquiries away from your customers and employees.



Pricing

Pricing a business is as critical as it is complex. You do not want to price so high that you receive little response from your marketing dollars, but so low that you give the business away without receiving fair value. This is not like pricing a house, where you just set the price a bit above a similar home that sold down the street. Records of business sale prices are few and far between. A professional would price a business based upon a careful analysis of the business and its financial performance. Are you up to the task?



Operations

The better your business is running, the more that it is worth. If you are selling your business yourself, you must make sure that the sale process does not distract you from running your business. There would be nothing worse than finding a good buyer who changes his mind because your business has suffered during the selling process.



Marketing

Marketing choices will strongly influence both your costs and sale proceeds. If choose to sell your business yourself, you will not have access to a buyer database as would a business broker. How else will you market your business to buyers? First, try to visualize the various types of buyers who might want your business. Then craft marketing messages and materials that will inspire them to call you. Place advertisements in media likely to reach these buyers. Often buyers can be be reached through business brokerage websites. But some websites are better than others, and some work better for certain types of businesses. Since many prospective buyers do not monitor these websites, you should add other media to get the best exposure and best price for your business. Consider advertising in newspapers, trade publications and direct mail.



Negotiations

Are you ready to represent yourself in negotiations with buyers and/or their representatives? Negotiating is a skill that can be learned. To be a good negotiator, you must understand what can be negotiated, aside from the sale price. Again, it helps to understand buyers and their motivations. Although price will be important to buyers, they may also be concerned with other aspects of the business sale, such as the financing terms, training and non-compete agreements. A good negotiator knows that almost everything is negotiable.



Legal and Taxation

Selling a business is a complex legal process with significant tax implications. Make sure that you do not share confidential information to anyone that has not signed a proper confidentiality agreement. Will this be an asset or stock sale? The buyer and seller need to understand the implications of each option. The purchase contract must be tried and tested, and tailored to local laws. The buyer and seller must disclose material facts to each other. Business advisors often have very good forms for these tasks, which may be hard for business owners to come by. How will buyer and seller get through the due diligence process, so that both are comfortable in moving forward, yet the process does not drag out for too long? Be sure to use a good escrow company, with an escrow officer who specializes in business sales. Business escrows are quite different than real estate escrows. Make sure that you understand the tax implications as well. Buyers and sellers cannot afford to make mistakes in the legal and taxation aspects of a business sale.



True Costs and Benefits

After considering all of this, are you really saving anything by selling your own business? How much are you willing to spend, in direct marketing costs, your own time, and opportunity costs? In return, are you getting top dollar for your business? You may find it cheaper and easier to hire a professional business advisor. Professional advice can be cheap insurance.

So yes, you can sell your business yourself, but it may not be the best idea!