How to Sell a Business

Step-by-Step Guide: Selling a Business with the Help of a Business Broker

1. Preparation and Planning

Assess Business Value: The first step is determining the value of your business. While you can do a basic valuation yourself, a business broker often has access to tools and resources to accurately assess your business’s worth based on market trends, comparable sales, and detailed financial analysis.
Engage a Business Broker: A broker is a trained professional who specializes in the sale of businesses. They can guide you through the entire process, ensuring that your business is presented in the best possible light and marketed to the right buyers.
Consult with Experts: In addition to your broker, you may want to work with accountants and legal advisors to ensure your financial records are up to date and all legal documents are in order.
Organize Financial Records: Brokers often assist in preparing and organizing your financial records, ensuring that they are comprehensive and appealing to potential buyers.

Research Brokers: Look for brokers who specialize in businesses similar to yours in terms of size and industry.
Broker’s Role: A business broker will help you value your business, create marketing materials, identify potential buyers, and manage negotiations. They act as intermediaries to reduce the emotional intensity and help keep negotiations objective.
Understand Broker Fees: Brokers typically charge a commission based on the final sale price, often ranging from 5% to 10%. Make sure you understand the fee structure before committing.

Broker’s Network: A business broker typically has an extensive network of buyers, including investors, other business owners, and private equity groups. This network can be a valuable resource when it comes to finding qualified buyers quickly.
Confidential Marketing: The broker will help you market your business confidentially, ensuring that sensitive information doesn’t leak out and impact operations or employee morale. This could include targeted advertising through their network or on business-for-sale websites.
Screen Buyers: Brokers will vet potential buyers to ensure they have the financial resources and experience to complete the transaction. This helps avoid wasting time with unqualified buyers.

Broker Facilitates Discussions: After potential buyers express interest, the broker facilitates initial conversations and sets up meetings. They ensure that discussions are structured and professional.
Non-Disclosure Agreement (NDA): A broker will help you draft and enforce an NDA before disclosing sensitive business information, protecting both parties’ confidentiality.
Set Expectations: The broker helps set realistic expectations for the sale price, terms, and timelines. They assist you in understanding the current market and advising you on pricing strategies.

Business Valuation by Broker: The broker will conduct a thorough business valuation or assist you in hiring a professional appraiser to determine the fair market value of your business. This will ensure you don’t overprice or underprice your business.
Negotiation Assistance: One of the key benefits of working with a broker is their experience in negotiation. They act as a neutral party, helping manage price discussions, payment structures, and terms of the deal, ensuring both sides are satisfied.
Offer Financing Options: The broker may also help structure seller financing or work with you and the buyer to create favorable financing terms.

Legal Assistance for the Sales Agreement: While the broker can help with the broad structure of the agreement, an attorney will need to draft the formal sales agreement. This document will cover terms such as price, payment method, and any contingencies or warranties.
Broker’s Role in the Agreement: The broker helps ensure that the terms of the sales agreement are consistent with the negotiations, facilitating clear communication between you, your attorney, and the buyer.

Support During Due Diligence: The buyer will conduct due diligence to verify your financials, legal standing, and operational performance. The broker will coordinate the due diligence process, ensuring that you provide the necessary documentation and that the buyer has access to all the information they need.
Addressing Issues: If the buyer uncovers any issues during due diligence (such as discrepancies in financials or potential liabilities), the broker can help you address these issues and work toward a resolution that keeps the sale on track.

Review and Finalize Terms: Once due diligence is complete and both parties are satisfied, the broker will help finalize the details of the transaction and ensure that everything is in place for the deal to close.
Closing the Sale: The broker will often be present at the closing to ensure that all documents are signed, the payment is made, and the business is officially transferred.

Transition Assistance: If the sale agreement includes a transition period where the seller stays on for a certain period to assist with the handover, the broker can help facilitate this process, ensuring that the transition is smooth.
Communicate with Employees and Customers: The broker can assist in preparing communication strategies for employees, customers, and other stakeholders about the sale, maintaining continuity and morale during the transition.
Prepare for Your Exit: The broker can provide advice on how to handle your personal exit from the business, ensuring that you leave on good terms and with proper documentation.

Tax Implications: After the sale, you’ll want to consult with your accountant to understand the tax implications of the sale. The broker may also help guide you through the process of structuring the deal in a tax-efficient manner.
Post-Sale Support: Some brokers offer post-sale services to ensure that any remaining issues or follow-up actions are handled properly. They can help you navigate any lingering details or complications.

Whether you’re planning to sell or just exploring your options, let’s start with a simple conversation.