Why riding solo is not a smart business decision.
Scenario
A business owner is approached by someone who wants to buy the business. They have several conversations and the business owner decides that this is it. This is my chance to sell. He chooses to go solo, selling the business by himself.
Afterall, if I already have an interested buyer, what do I need a business broker for?
Reality
Attracting buyers is one of the easiest aspects of brokering the sale of a business. In today’s market, there is an abundance of prospective buyers looking for the right business to acquire. However, more overall buyers doesn’t mean qualified buyers.
As business brokers, we have developed relationships with different types of buyers, from individuals looking for a new career to strategic buyers and private equity firms targeting specific industries, locations or both. With our decades of experience, we can readily attract qualified buyers for virtually any business.
But there is also another category of prospective buyers out there who may initially appear credible or qualified, but they are not. The industry refers to them as ‘searchers’. They target business owners with the hope that you believe they are credible and qualified to buy your business. They send out hundreds of emails to businesses across industries wanting to buy your business and they send direct mail, too. In many cases, they have never run a business nor do they have any capital to do a deal themselves without the help of investors. This category of buyers can take up a lot of time and energy and may not result in a deal or be the best buyer for the company.
The Power of a Competitive Process
Choosing to work with one prospective buyer to sell your business is a missed opportunity as you have given up the benefit of a competitive process that a business broker naturally creates when bringing a business to market. On average, we typically attract 3-4 offers per listing and sometimes more than 10, which naturally drives up the price of your business and/or creates better overall deal terms. We recently brought an HVAC company to market and after only a week have multiple offers over asking.
By deciding to sell your business on your own, you have likely settled on a reduced price and you have given up being in the driver’s seat when it comes to negotiating terms of the deal. The sole prospective buyer you are talking to has taken that seat. Your leverage is significantly reduced in finalizing the deal.
One Buyer Increases Your Risks
One of our brokers was speaking with a business owner about listing his business. The owner chose to go solo, working without a business broker to negotiate a deal with one prospective buyer. In finalizing the terms of the deal, the seller agreed to finance 100% of the sale! Not only did he miss out on the benefits of a competitive process, he increased his risk by agreeing to finance the deal completely.
Unless you have experience as a business broker, it is ill advised to sell your company on your own.
Another example: How does an additional million sound to you?
One of our business brokers was brought in to help finalize the negotiations after the owner had identified a prospective buyer but valued the role of bringing in a seasoned business broker to negotiate the price and the deal terms. Our business broker negotiated an additional one million in the sales price for the owner with that same buyer and facilitated the deal through closing.
MYTH: It’s easier. I’ll make more money selling it myself than using a business broker.
Selling a business on your own is not easy nor is it easier than having a business broker. With BayState Business Brokers, we will be with you every step of the way, quarterbacking the process from start to finish including the early morning and late night calls to navigate hurdles (there are always hurdles) and to bring in the experts, when and as needed, to facilitate the close. And, we can mitigate pitfalls and challenges before or as they happen which could be deal breakers if we were not involved.
You will be in the driver’s seat and we will be right next to you in the passenger seat, guiding and advising you every step of the way.
Choosing to sell on your own puts a lot of pressure on you as the business owner. Buyers expect the business to continue running at the same pace while you handle the deal negotiations and diligence. That’s a lot of extra work on top of a long day running a company. We handle many of the deal logistics such as diligence, so you can remain focused on running your business, with your foot on the gas. Going solo is not easier. It is harder and frankly, not a smart business decision.
At BayState Business Brokers, we take the heavy lifting off of your plate from vetting prospective buyers to advising on deal terms to mitigate your risks and navigating all the details that can consume hours of meetings and phone calls to bring details to proper and timely conclusions so that the deal moves forward to a successful close.
With us, you have a team of experienced brokers that includes a vast network of professionals including attorneys and specialists who we can contact when and as needed to keep the deal on track. With 10 brokers in our office we have shared knowledge, so we can provide a higher level of service to our clients and manage their deals effectively.
Example: A closing was scheduled for two weeks out, when it was brought to our attention that an ALTA survey would be required by the bank to close. Initial conversations confirmed that would take an additional 6 weeks and the closing would be moved out significantly. One of our brokers secured a licensed professional land surveyor in our network that another one of our brokers had used recently and they did the survey within a week. The deal closed on schedule. Would you be able to do that on your own?
Financing Can Make or Break a Deal
As a business owner negotiating terms with one buyer, you run the risk of the interested party not being able to secure financing. As experienced business brokers, we help our clients by effectively vetting prospective buyers early in the process to weed out those who are not qualified for financing while introducing qualified prospective buyers with lenders to facilitate a smooth process including secured financing. There are so many lenders out there but not all are experienced and can get a deal done. We partner with the best lenders in the market, and in many cases prequalify our listings so we know they are financeable before we go to market. This streamlines the process and can speed up the closing.
Will we work with parties who have expressed interest in your business?
Yes. BayState Business Brokers will incorporate a prospective buyer or multiple parties that you have had conversations with into our competitive process to identify the strongest potential buyers for your business.
Conclusion
Business owners understand the bottom line. The bottom line: settling for the first offer you get for your business is not a smart business decision. You are leaving money on the table and likely taking more risk than necessary.
Stay in the driver’s seat. Choose the right passenger.
Your goals fuel our passion.
