A reader, who I’ll call “Mary,” emailed me recently wanting to how to go about selling the family business. I thought the answer might be valuable to you, too. So I’m sharing the answer here.
“Mary” Writes This Question:
My husband & I own a business that he inherited from his Dad. His Dad started the operation in the 1960s and since 2002 we have been running it. My husband is owner/operator and I do all of the AP/AR, phones, typing documents, etc.
Simply put we’ve had enough & want to sell but neither of us have any idea how to go about it. We could probably sell for millions but, just as easily, we could be taken to the bank.
Any advice on how to go about starting this process? Any advice would be most appreciated.
The Answer to: How Do I Sell My Business?
Hire a business broker. They’re like real estate brokers, but handle businesses instead of just real estate.
You’re more likely to get fair value for your business with a good broker representing you. A broker will help you set an asking price that’s reasonable without leaving money on the table. A broker will actively market your business. The broker will also guide you through the selling process, which can be rather involved, with due diligence, negotiations and closing.
Interview at least 3 brokers so that you make an informed choice. Don’t rush your choice. Look for someone you have confidence in. Look for someone who:
(1) will do a comparable sales analysis and a professional valuation of your business; and
(2) outlines a solid game plan for marketing your business.
Where to Find a Business Broker
To find a broker, start with your accountant or attorney. That’s one of the benefits of having relationships with advisors. Often they know the business brokers in the local community.
Or you could go over and search at BizBuySell.com. It’s a well-known website that partners with the Wall Street Journal. There’s a section that lists business brokers. Be sure to ask for references and check them.
Don’t Try to Sell on Your Own
Unless you are used to wheeling and dealing, I do not recommend trying to sell your business on your own. You’d still have to value the business so as not to leave money on the table — and that’s hard for a layman to do accurately. Or you’d have to pay for a professional valuation anyway.
Selling a business is an involved process. It’s best to have an experienced professional on your side to show you the ropes. On top of that, you’d still have to do all the marketing — something that’s hard to do while you’re running the business day to day. It takes 9 months on average to sell a business. You can’t afford to neglect the business for such an extended time while you’re caught up selling it. If revenues/profits drop, the selling price also suffers.
Fees and Commissions
A word about broker fees: You’ll likely pay a commission of around 10% of the sales price. (See also Business Toolkit.) That’s just a rule of thumb, not a guarantee. Some brokers charge more. Some charge less on any real-estate involved. If you interview at least 3 brokers, you’ll get a sense for the going rate for fees in your industry and geographical area.
I never begrudge paying a good professional. Instead I look at the end result. Am I likely to have more money in my pocket after a sale by using a broker, as opposed to going it alone and possibly making a big mistake?
Consider this example:
Selling on your own you get $600,000 for your business. But if you had hired a good business broker who gets $750,000 for your business, and takes a 10% commission, you’d still net $675,000 or $75K more than on your own. How could the broker get such a higher price? Because valuing a business is an art, not a science, just like negotiating a good deal is an art. A broker can help with both.
Good luck to you and your husband.