Is It Ever A Good Idea To Try To Sell Your Own Business?

24/10/2008 by info.

For most businesses the answer is no for the following reasons:

1. You are not a professional, are too close to your business and you don’t know how to properly present your business to other people. The chances are that you might already know the likely buyer of your business. You however only get one chance to present that business to them and if you mess up then they will not give your business a second look, even if you subsequently instruct an agent to sell it.

2. Selling a business is a time consuming exercise and the business owner often underestimates the amount of time it will take to sell the business. We will be talking to people on the telephone who are just browsing and those who have no money. He will be wasting hours of his valuable working life not running his business. What happens the business suffers! What most buyers do not appreciate is that business agents do this on a daily business allowing the seller to concentrate on his profits.

3. The business owner is often worried about giving away information to strangers so they will only publish basic information certainly not enough information for a buyer to draw a conclusion on whether they are interested or not. The result they will contact the buyer to get more information (see above point 2). Confidentiality is important to a seller who are often petrified that people will know that he wants to sell. An agent can however maintain this confidentiality, and only disclose the name of the business after certain formalities have been followed.

4. An agent can qualify the buyer, ensure that they have access to the money to buy your business. Buyers especially in todays market overestimate the amount of money that they will be able to borrow to buy a business, perhaps they might think that they can borrow all of the money to pay for the purchase. The result is you do not talk to people who do not have the money to buy your business (see above point 2)

5. An agent will be able to set the most appropriate price for the business and negotiate a higher price than the private seller often would, often this increased selling price pays for the agents services. It is difficult for the private seller to be objective in the negotiations. If you want to give your business away at a bargain price then of course you will have plenty of takers, the skill is to sell it at the market price or above.

6. An agent will know other professionals that can help both you and the buyer complete this transaction. Accountants, solicitors, surveyors, energy inspectors, commercial finance brokers, stocktakers, bankers and some of the professions that may be needed. This smooths the selling process.

7. Arguments, yes selling a business is stressful and often the two parties fall out with each other without that buffer of the agent the sale will collapse, an agent can ofter calm both parties and suggest solutions to the problems.

8. An agent may cut your legal bills, a business agent will provide both sets of solicitiors will head terms, basically terms that have already been agreed, this cuts the opportunity a solicitor has of negotiating the deal and antagonising the other party. Often the buyer and seller are not aware of the information the solicitor needs meaning that they have to constantly write to them increasing the cost of selling.

9. Advertising is expensive, and although an agent may ask for upfront money to cover this cost, he will be able to advertise your business for longer and cheaper than the private seller. Website publications such as businessesforsale.com and daltonsbusiness.com will give an agent much better terms than you can ever get. And for the private seller it is amazing how quickly he can spend £500 on advertising.

10. Buyers may tell the agent the true reason why they were not interested, where they would not do so with the private seller. This gives the agent and the seller an opportuinity to deal with this issue the next time someone is interested.

11. You may accept an insincere offer and spend time and money following this offer only to have to put it back on the market later. An agent is experienced in recognising whether a buyer is likely to complete the transaction.

12. An agent is experienced in overcoming objections, and will recognise whether these is a true objection that he can overcome or ones that can give the insincere buyer a way out without loosing face.

So is it ever a good idea to try to sell your own business?

The answer is yes in one case only, that is when the asking price is so small that the agents commission would swallow all of the sale proceeds. Agents will tend to want a minimum commission £3,000 - £5,000 is commonplace. If your business is not worth much money perhaps it is best to try your luck privately.

Horizon Business Agents

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