Why Not Sell The Business On Your Own?

How many “Business For Sale” signs have you ever seen while you drive down main street or on your daily drive to work? None? Well, there are very logical reasons why you haven’t. The biggest reason is that the “Business For Sale” sign would soon be replaced with a “Going Out Of Business Sale.” Consider the following points.

First off, even if the you don’t actually hang a “For Sale” sign outside the window, trying to sell it on your own through classified ads, or, heaven forbid, by word of mouth, for instance, threatens the business’ reputation and future. Secondly, even if the right prospective buyer comes along, do you — an owner of a privately-held company — have the required skills and knowledge in the fields of accounting, law, taxes, marketing, and more importantly, negotiating on your own behalf about perhaps your most important asset — your livelihood?

Do you, a business owner who is trying run your business on a daily basis, have the time to find, contact and liaise with potential buyers that are serious about buying your particular business? Can you maintain the confidentiality that is required to prevent damaging your competitiveness in your market area? If staff and suppliers find out that you are selling, it will affect current trading ability. Do you have any experience in selling a business? Can you remain cool and patient when a buyer is trying to negotiate a lower price, particularly if their objectives are the complete reverse of your own? Do you even know how to value your business and what it is really worth in the marketplace?

Let’s discuss the issue of primary concern when selling a business…confidentiality. The most important aspect of selling a business is confidentiality. It must be maintained throughout the entire selling process. If people find out that your business is for sale, it will be perceived in a negative light, where some, mainly your competitors, will take advantage and can cause damage to the ongoing viability of your business.

There is, of course, the proper time to disclose an impending sale. The preferable time to come clean is when the business is under contract and has entered the final stages of the selling process. By looking at the different responses by the varied types of people associated with your business to the news of your business being for sale, you will understand why confidentiality is necessary.

Customers -

If customers get wind that your business is on the market, they will most likely take about a New York minute to hike on over to one of your competitors to do business. Losing customers affects the value of the business — less sales means less profit, and less profit means less interest from prospective buyers. After all, one of the major reasons why someone would want to buy your business is because of the profit they could make.

Employees -

If employees are told that the business is up for sale, think nano-second. If you think a New York minute is fast, your employees would evacuate the premises before you can blink. They will feel insecure about their future and will seek more stable employment. Fear of new management and whether job cuts would ensue are legitimate concerns for anyone in which your business is their livelihood. If key members of staff left the business after hearing the news, it may seriously cripple the performance of your business. Consequently, not only will the value be reduced, but the chance of selling your business is significantly diminished.

Suppliers -

Your relationship with suppliers may take a turn for the worse if they are aware of your plans to sell the business. They may feel that your decision to sell is based around financial difficulties and, if you currently purchase supplies on credit, they may reconsider your position and demand cash on delivery, which may certainly have an effect on your immediate cash flow. Great businesses are sold every day. However, in general, their is a negative perception of a business when it is rumored to be for sale.

Banks -

Banks are very cautious of small businesses because of their risky nature and so it is no surprise to how they would react when they find out that yours is for sale. They may decide to put a halt on further borrowings, overdrafts or lines of credit available to you . Or, even worse, put out a call to recover any outstanding debt.

Competitors -

How would you react to news of your competitor putting their business on the market? Very positively one would assume. This is exactly how your competitors will react should they discover that you are selling your business and would take quick action to affect your sales and customer confidence. Competitors would announce it from roof tops if they could to make it known that you are selling so they can reap the harvest of new profits from your old customers.

For these reasons a business brokerage firm would be very helpful towards selling your business. In fact, they can be the essential ingredient. Let’s explain this statement further. Before you believe in the necessity of contracting with a brokerage firm to represent you in the sale of your business, it is important that you recognize the value they bring to the table.

Business brokers, in general, work on a success-based commission. They get paid when the business is sold and the deal is closed. They are your partner throughout the process and utilize unique marketing methods to achieve the goal. Not only will they find and screen prospective buyers for your business, they can value your business, settle negotiations, and help obtain. Experienced business brokers can often obtain a higher selling price because they are in tune with current trends and economic conditions in their market area and are aware of what people are looking to buy. Supply and demand plays a factor when a business is up for sale. For example, a seller’s market in Houston has existed for the past couple of years and is still ripening due to the superior economic conditions it has enjoyed over the rest of the country.

Also, potential buyers will feel more at ease speaking to brokers then they would directly to the owner and by doing so, it allows you the time to continue running the business and keeping it profitable. Most importantly, brokers will provide the confidentiality you need, saving you potential grief from the issues surrounding customers, suppliers, and competitors.

Finding a reputable broker can be done through referrals from fellow professionals such as accountants, attorneys, small business lenders, and even by word-of-mouth from people that have previously used a broker.

In conclusion, whenever a business is on the market, it must to be done in a confidential manner by someone who has done it thousands of times. Owners have good reasons for selling, and there are great businesses being sold every day. But there are negative connotations attributed to a business for sale in the general public’s eyes. They think there must be something wrong with the business. Which, of course, is not the case in most instances. Keep in mind these two statistics. The national average of businesses that actually sell once they are on the market is approximately 30%, the reasons for which a business broker could explain to you. And, only one in ten people who are looking to purchase a business, ever actually do. So, if trying to sell your business on your own fails, you may have lost customers, vendors, or employees. You don’t want to end up putting that sign on the window that says, “Going Out of Business Sale!”