You built your business – surely you can sell it, too. Right? Well … maybe? There are pros and cons to selling your business on your own. No matter what path you decide to take, it’s important to know the benefits and pitfalls.
- Familiarity – No one knows your business like you do. You’re in the unique position of knowing everything there is to know about it – the people, market, products, and competitors. Maybe you’ve even been approached by someone who’s interested in buying your business. You’re also the expert on your personal situation. No one knows better when you’re ready to pass the torch.
- Selling price vs. fees – Involving outside parties costs money. Bringing in a mergers and acquisitions (M&A) professional will require a percentage of the sale price. This fee is usually 2% to 10%, depending on the sale price. You can save this by doing all the work yourself.
- Confidentiality – We put this at the top of the list for a reason. It’s imperative that your plans to sell stay confidential, both internally and externally. If word gets out, you may lose key employees, intellectual property, and clients. Publically, you want your plans to remain confidential for as long as possible. Leaks can impact buyer response and offerings and put you in a less-than-ideal negotiating position.
- Objectivity – Emotions can get in the way of a sale. Many business owners think their businesses are worth more than they actually are. It’s easy to understand, but it doesn’t contribute to a successful sale. Selling your own business requires you to look at the market objectively. It will help you time the sale and develop a realistic sales price.
- Fees vs. selling price – Professional help costs money. But an M&A professional can help you get more for your business. And they have a base of buyers to draw from. A professional will earn his or her fee several times over by increasing the value of your business and taking care of the process. They allow you to do what you do best: run your business.
- Time – Selling a business can take a year or more. During this period, your business not only needs to continue to run, but it needs to be at its best. And that includes maximizing value. In the meantime, there will be meetings with buyers, accountants, and lawyers. Selling a business can be a full-time job. If you’re heading up that effort, who will run the business?
- Experience – Have you sold a business before? Do you know how to deal with experienced buyers that have done it many times? Do you know the games some buyers play and how to stop them? What should go in a letter of intent? What working capital items go with a sale? When to release information and when to not? If you’ve done it before, great – you understand the complexity of the process. But if not? Consider enlisting the help of experienced professionals.
- Process – There’s no specific procedure for selling a business but there are many little nuances that can be impactful. With legal, financial, and tax issues at stake, getting it wrong could influence your cash proceeds. You must know what you’re supposed to do and when. Take the time to conduct the sale of your business as carefully and thoroughly as you now run it.
- Buyer qualifications – Even if you’re qualified to sell your business, a buyer might not be qualified to purchase it. Buyers should be evaluated and many pre-qualified before you share any information with them. There’s a lot at stake, so take the time for due diligence. An M&A professional will screen buyers so you don’t waste your time.
Selling your business is a huge step. We may be slightly biased, but the pros and cons don’t lie: you’re better off getting professional help. The money you spend on experts will return to you, and you’ll get valuable guidance every step of the way. You’ll only get to sell this business once. Let’s do it right. Contact O'Keeffe & O'Malley today.