Who Should You Sell Your Business To?

If you ask atraditional (old fashioned) business broker, the standard answer will be “lets just list it first, then we’ll find a buyer”. What they’re doing is operating like a residential real estate agent, and that’s plain dumb.

Yes, a member of the public may buy your business, but first you need to consider:

  1. Management and staff
  2. Customers
  3. Competitors
  4. Suppliers
  5. Investors
  6. Migrants

The groups of potential buyers will know and understand your business better than any member of the public. It will be easier to “sell them” on the value of your business. Only after you have ruled out all of the above should you consider selling your business to someone you don’t know.

Should You Approach Them Yourself?

Well you could, but I’d advise against that until you’ve first prepared a detailed Information Memorandum – the type of document you’d expect to see if you were considering buying a business. By being fully prepared, your approach will have a greater chance of succeeding.

There is a lot to be said for not trying to negotiate by yourself.

  • Firstly, a business sales professional will have the necessary legal documents which you need to protect your business’s confidential information. If you try to write your own confidentiality agreement / non-disclosure agreement, it may not protect you sufficiently. Cutting a few corners may cost you more in the long term.
  • Secondly, negotiating at arms length through a business broker will normally achieve a higher price. They will understand how to present your business in the most positive manner possible. They will also not be emotionally attached to either the business or to any of the potential buyers.
  • A business broker will have a better understanding of the real value of your business. Many times I’ve met business owners who vastly under-estimate their business’s value. If they had sold it for what they thought it was worth, they’d have been literally giving it away.
  • The fees that a business broker charges should more than cover the difference between what you thought the business was worth and the higher price that they achieve for you. Following the correct procedures and adhering to your goals (such as trying to ensure your management get to own a share of the business) will get you the result you want.
  • Targeting the four key groups as noted above will mean you don’t incur any unnecessary advertising or marketing costs.
  • Trying to negotiate the deal yourself takes lots of time – and you still need to manage the business in the meantime. Something will suffer – the business or you!
  • Remember – you’re selling a business, not a house. Don’t be fooled into trying to save a few dollars on the commission, only to sell for a much lower price than we could achieve for you. It is just false economy!

If you’d like to discuss the possibility of selling your business in Rockingham or Kwinana, call Martin Dabb  ph; 0458 290 100 (Perth) or Email Me to discuss any issues or questions.

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