Why Do I Need a Broker?

February 26, 2019Insights

You have always figured things out; that’s what makes you an entrepreneur. The fact that you have grown your business to the extent that you can consider selling it speaks volumes about your grit, persistence and resourcefulness. Now that you’re ready to sell, you figure you can probably win at this, too.

 

Business owners are notorious for not wanting help. They’re reluctant to pay service providers, not necessarily because they don’t value them, but more so because they believe in their own abilities. No harm, no foul, but before you try to sell your business solo, consider what you’re getting into.

 

You Only Do This Once

A business transaction only happens once in a lifetime, if at all. Only about 20% of the business that are for sale will actually close.  Most businesses never sell but instead just close. If your business is among the few that can be sold successfully, you will only get one opportunity to do it the right way and get the right price.

 

You Don’t Know How It Works

Sophisticated buyers know how to buy a business, but everyday owners don’t know how to sell a business. Advantage, buyers. To take a lesson from my previous article on the perils of fielding an unsolicited offer as a business owner:

 

“A buyer who knows they’re dealing with an owner and not a savvy seller can skate a number past you with little to no context. Is the sale price in cash? Will there be financing (a.k.a. debt) involved? What will you make from the sale after tax? You don’t know what you don’t know, and you can’t find out what you don’t know to ask.”

 

Avoiding the wrong buyer is only half of the equation. You also need to find the right buyer, which takes time. And that leads me to my next point:

 

You Need to Run Your Business

Every minute you spend on pursuing a transaction, you’re taking out of running the business. Now more than ever, you should be focusing on making your business as healthy as it can be. Say you begin spending 15 hours a week trying to sell your company. Over the 6-9 months it takes to sell a business at fair market value, that amounts to nearly 600 hours subtracted from operations, sales, business development, finance and all the things that make a business salable in the first place. And since you don’t really know what you’re doing, those aren’t even 600 quality hours.

 

Now, say a broker takes a $100k commission from your sale. Do you believe that during those 6-9 months, with 600 hours back in your pocket, you can generate $100k or more in gross profit to offset the commission? Most owners will say, “yes.” Simply by allowing you to do your job, the broker is worth the commission—and we haven’t even tapped into their underlying value yet.

 

A Broker Does This For A Living

Are you looking to attract more buyers, and better buyers? Get paid faster? Have the terms of the deal weighed in your favor? While you run your business, your broker is working to get you the win. That includes seeing the sale through, a long process involving tax strategy, the IRS, financing, banks, agreements and endless paperwork. If you did manage to get to a deal on your own, your 15 hours a week could quickly jump to 30 or 40. And again, those aren’t quality hours. You’re running on will and desire, not skill or experience.

 

DIY Doesn’t Save

If you have the time to sell your business, or want to learn, by all means, go for it. In most cases, though, owners do this because they think they’re going to save money, and that’s simply not how it goes. The owner who is already fighting every day to find more time for new work, collecting cash, dealing with employees and surviving is not the person to sell their business alone. Get the right broker from the start, or risk hurting your business and sale price en route to needing a broker in the end anyway. You can learn more about our approach to brokering a business sale here