[Quick Answer] - Should I Use a Broker To Sell My Business?

Thinking about selling your business? It's a pivotal decision, so take your time. After all, the path you choose can profoundly impact your future.

You’ll likely have several concerns about how to sell a business privately, and that's completely natural. Questions like, “Should I use a broker to sell my business?” require careful thought.

This quick guide will explore the pros, cons, and other considerations about brokers. Whether you're a seasoned entrepreneur or an established business owner, we want to ensure you can weigh your options effectively. So, let's get started!

Quick Answer - Are Business Brokers Worth It?

Selling a business usually takes 6-12 months. That’s why you might consider hiring a broker to maintain profitability while selling and transitioning ownership.

However, as we will discuss in this blog, whether to use brokers to sell a business depends on factors such as your selling expertise, negotiation skills, time constraints, and tax considerations.

At the same time, in some circumstances, you may not require the services of a broker. For instance, you want to avoid broker fees or sell to a family member.

If you prefer opting out of a business broker, you could also consider teaming up with merger and acquisition (M&A) professionals like lawyers and accountants to support your business sale.

Explore how Exitwise can assist you in connecting with M&A experts to maximize your business sale.

FSBO vs. Realtor - What Changes While Selling a Business?

In real estate terms, FSBO (For Sale By Owner) means selling without a realtor. In contrast, a realtor is a licensed professional who helps clients purchase and sell real estate transactions. 

For comparative purposes, think of FSBO as DIY (Do It Yourself) selling and realtors as the experts handling the business sale. By understanding the nuances, you can plan whether to go solo (FSBO) or leverage brokers to sell your business.

The following table offers a comparative overview of various factors related to selling a business through FSBO versus employing a business broker.

At this stage, as you contemplate, “Should I use a business broker to sell my business?” you could use the Exitwise valuation calculator tool to learn your business's true value and make informed selling decisions.

What Does a Business Broker Do?

Entrepreneurs and successful business owners contemplating hiring a business broker are often uncertain about their role. So, let's first understand what a business broker does.

In simple terms, a business broker is someone who helps with buying and selling small businesses. Typically, a business broker for small businesses handles tasks like:

• Preparing your business for sale and discussing goals and timelines.

• Creating a detailed profile and marketing materials, like a Confidential Information Memorandum (CIM) and pitch decks.

• Finding potential buyers via their network while keeping your information confidential.

• Handling buyer inquiries, meetings, and screening.

• Leveraging industry data to set a price for your business, negotiate, and structure the sale.

• Assisting with paperwork and licensing, ensuring your financial records are in order, and guiding you through escrow and closing.

• Managing outstanding issues that may crop up through the sale process.

Understanding the functions of a business broker for a small business sale will allow you to determine whether their services align with your needs and objectives.

Why You Should Use a Business Broker?

Utilizing the services of a business broker for a small business sale can help you navigate the complex process easily.

Here’s why using a business broker is a smart move for some:

• Expertise in Selling: You're great at running your business, but a professional broker knows how to sell it best and understands the unique process involved.

Notably, from helping value your e-commerce venture to selling a medical practice, business brokers are experts in multiple tasks and industry specifications. So, finding one with experience in your particular type of business is crucial.

• Targeted Buyer search: Brokers help find and manage serious buyers interested in your business, saving you time and hassle.

• Strategic Marketing: Brokers help you create attractive marketing strategies to find the right buyers. They have access to a pool of potential buyers and know how to reach them effectively, ultimately leading to a higher purchase price for your business.

• Efficient Negotiation: Brokers are experienced negotiators who can get you the best price. Additionally, they keep the process organized and handle paperwork, saving time and stress.

• Confidentiality: A broker markets your business confidentially - they create materials to attract buyers without sharing sensitive details, protecting your trade secrets during the sale.

• Tax Considerations: Selling a business involves taxes. Brokers selling your business can advise you on the best way to structure the sale to minimize tax liabilities and ensure you keep more of the profit.

• Saves Time: Selling a business is time-consuming, which can be overwhelming for busy business owners. Brokers handle the entire process, allowing you to focus on running your business hassle-free.

If you seek these benefits, consider selling your business through brokers. Yet, if you're unsure about going solo or with a broker, we understand—selling a business can be daunting.

So, while utilizing a business broker can help you sell your business, it's important to acknowledge scenarios in which hiring a broker may not be the most suitable option for you. Let’s dig in!

Why You Should Not Consider a Business Broker?

While utilizing a business broker is a common choice for many, there are significant reasons to avoid this route.

Let’s look at a few:

• Greater autonomy: If you have expertise in selling businesses or prefer retaining control throughout the process, managing it independently can save costs and time instead of partnering with a broker.

• Pre-existing connections: If you have a buyer in mind, like a family member or employee, or already have trusted advisors experienced in selling businesses, using a broker may not be necessary.

• Cost concerns: Business brokers charge commissions ranging from 5–10%, plus additional fees like advertising costs, which can eat into your profits.

• Difference in motives: Brokers might prioritize their interests over yours, pushing for higher listing prices that may not reflect market value, ultimately resulting in a bad deal.

• Lack of domain knowledge: Finding a broker with adequate market understanding for specific niche industries can be challenging and hinder your sale while lowering the sale price.

At Exitwise, we are fellow entrepreneurs who can help ease the process. Discover our story and learn how we can help you shortlist, hire, and manage your dream M&A teams instead of using a broker.

Can I Sell My Business Without A Broker?

If you understand brokers' roles and are willing to take on the tasks yourself, consider these scenarios where selling without a broker might work:

• If your business is valued under $100,000, selling it yourself can save money.

• Having a buyer and receiving a fair offer puts you midway through the sale process.

• You’re confident in handling finances, paperwork, and negotiation; you could manage the sale effectively.

• If you've previously bought or sold a small business, you're well-prepared to handle the sale independently.

• In a distressed sale situation, where you urgently need to sell your business, you could sell it without a broker. Direct negotiations can expedite the process and maximize sale value in a short time frame.

Since you have control over the process, you can confidently take charge of every aspect of selling your business. Now, let's explore how to sell a business privately without a broker.

How to Sell a Business Without a Broker

Don’t want to engage a broker but want expert advice? You can consider various alternative options, like engaging M&A experts. While the idea of selling without a broker might seem daunting, these professionals offer a range of unique benefits, such as:

• Efficiently handle large-scale deals spanning multiple locations, ideal for complex mergers or sales.

• Provide comprehensive services, including strategic planning and continued post-deal support.

• Utilize valuation methods that consider strategic targets and future growth potential.

Navigating the M&A landscape might seem daunting if you're new to it. However, with Exitwise, a robust platform, you can easily connect with top experts to build your dream M&A team and sell your business for top value.

We'll walk you through the step-by-step process designed by us at Exitwise to help sell your business without a broker:

• Personalized consultation: Our M&A advisor will provide a detailed guide on selling your business, from valuations to signing the purchase agreement.

The advisor will address your concerns and understand your business history, finances, and needs to find the ideal M&A experts for your exit plan.

• Panel shortlisting: Based on your business information, we offer access to the top picks for investment bankers, M&A attorneys, and tax accountants. You'll get details on past deals, valuation range, fees, and pros and cons to help you find the right fit.

• Negotiations and hiring: We negotiate engagement letters with chosen M&A experts to ensure fair fees and terms. Once all parties reach and sign agreements, the business sale process commences.

• Counsel and Support: Partnering with Exitwise ensures continuous support from M&A experts throughout the process. Support includes guidance for buyer meetings, handling working capital adjustments, and discussions with key stakeholders like employees, investors, and customers.

So, are you ready to maximize your business sale without a broker? Connect with us at Exitwise to learn more about how we can help you achieve your goals and start your journey by building your dream M&A team!

Frequently Asked Questions

In this FAQ section, you'll find answers to common questions about using a business broker for your business’s sale.

What is the Standard Commission Rate for a Business Broker?

The percentage brokers charge for commission varies typically between 10 and 20 percent and is usually based on the sale price.

For example, for deals under $500,000, you might pay around 15%. For deals up to $1 million, expect about 10%. Bigger sales usually mean lower percentages.

Is an Advisor the Same Thing as a Business Broker?

No, an advisor is not the same as a business broker. Business brokers handle small deals for individual companies, while advisors handle big deals for large companies or governments. They use different valuation methods, target clients, and get compensated differently.

Notably, brokerage firms sometimes use the terms interchangeably, calling their brokers "advisors" to build trust. If you're unsure about the role of the professional you're considering, ask them how their services compare to those of a traditional broker.

Do You Need a Broker if You Already Have a Buyer?

If you already have a buyer, especially someone you know, like a family member or employee, and you both agree on a price, you may not need a broker.

However, teaming up with a broker can attract more offers, boost prices, and ease negotiations for better terms, all while keeping stress levels low and sidestepping common pitfalls.

How Do I Find a Broker to Sell My Business?

When finding a broker, it's vital to meet them in person. Most offer a free consultation to determine whether you're a good fit.

Moreover, consider these practical tips to find the ideal broker:

• Find one who has sold businesses like yours before.

• Ask about their marketing strategy - ensure they have a clear plan to attract buyers.

• Choose someone who communicates well and asks detailed questions.

• Know their commission structure and any upfront costs.

• Work with someone you feel comfortable with and trust. If unsure, keep looking.

Conclusion

Deciding whether to use a business broker to sell your business involves carefully considering various factors, such as expertise, time constraints, and preferences for control.

While brokers offer expertise in valuation, marketing, and negotiation, opting to sell independently can provide greater autonomy and cost savings, particularly for smaller businesses.

In such situations, you can opt for M&A experts to sell your business faster and at a reasonable valuation.

If you're ready to explore your options, Exitwise is here to help. Connect with us today to hire your preferred M&A team and create the exit you deserve!