Business For Sale By Owner

There are a small group of business owners that have the desire to try and sell a business themselves without using the services of a business intermediary (without a 'business broker').  Sometimes this may make sense, depending on the business, but often this strategy does not lead to a successful business sale – or one where the price is much lower than could have been achieved by using the services of a business brokerage.  Proceed with caution with a business for sale by owner strategy.

This article is a brief exploration of some reasons to consider selling a business privately and also some reasons why it is better to use a business brokerage firm.

Reasons to list a business for sale by owner
In a situation where the business is very small (valued less than $75,000 or $100,000) then it might be wise to consider listing the business for sale by owner.  The key is to determine for yourself if the commission that a business broker is enough to use his or her services.  Although a business broker may work on a success-based commission, if the overall business value is too small then it may not even make sense for a professional to take on the listing.

Another reason to consider listing businesses for sale by owner is if the company is not doing well financially.  Perhaps it is not profitable and profitability is not expected to be reached in the short or medium-term, then this may be a case where it might make sense to sell the company privately.  These types of businesses are difficult to sell from the business broker’s perspective and you may have concluded that the business value is near the market value of its assets.  In this scenario, using a business broker to sell the venture as a going concern would be challenging.

Some reasons not to list a business for sale by owner
Although there are many reasons to use the professional services of a business broker (or “sales representative”), here are 3 reasons to consider why it is not advisable to try to sell your company privately:

Exposure to many buyers
If you wish to sell a business you will need exposure to a large pool of buyers.  This is important for a number of reasons but the most important one is that most business “buyers” never end up purchasing a business at all.  There are many, many more ‘tire kickers’ in the market than there are legitimate buyers so it is important to get as much exposure for your business for sale as is possible.  This is needed in order to land of a few serious buyers that might be interested in making an offer for your company.  A business broker will have access to a larger pool of buyers and will know how to attract interested parties to view your business.

Communication
Many business buyers prefer to channel their thoughts and feedback to a business broker instead of directly to the business owner.  Often, the business broker is used as a sounding board or just an unbiased ear to listen.  The business intermediary will also maintain the honest flow of communication that is so critical when trying to sell a company.

Guidance through the process
Business buyers and sellers are usually new to the process and are usually more than happy to rely on a business brokerage professional to manage the process.  Most people are surprised to learn how complicated a business sale can get and get significant value from the guidance that a professional can provide.

Listing a business for sale by owner is certainly an option for all business owners to consider.  Please weigh all of your options carefully before you decide which is the best decision for you.  Talk to a qualified business broker to learn more about the business sale transaction.