Regardless of your business’s industry, location, or size, the process of selling a business is fairly consistent. The factor that will actually have the biggest impact on your journey through the sales process is choosing to work with professional business brokers, rather than navigating the sales process yourself. Yes, it is possible to sell your business on your own; but here are 3 reasons you need professional representation to achieve the best result.
1. Confidentiality
The number one reason to secure the representation of business brokers is confidentiality. Confidentiality is absolutely critical when selling a business. Why? For one, competitors can try to use the information to sell against you. Also, if customers hear that your business is for sale, they may doubt your ability to serve their needs moving forward and begin to shop around. Finally, if employees hear that you might be selling, they may question the stability of their employment and begin to look elsewhere. Business brokers can reach out to prospects or field inquiries from potential buyers without ever mentioning your name or the name of your business. Working with a broker is the most reliable way to maintain confidentiality while selling a business.
Consider the challenge of marketing your business for sale. Unless you already have a buyer lined up, you will need to market your business to potential buyers. At Viking, when we package a business for sale, we gather all necessary information into a short profile that provides pertinent details on the business’s greatest differentiators and assets without disclosing any sensitive details or names. We use that summary profile and other materials to market the business to our own network of thousands of prospective buyers. We also market the business via the internet, strategic direct mail pieces, newsletters, and more, going to great lengths to keep the identity of the business confidential.
2. Buyer/Seller Meetings & Negotiations
When a serious prospective buyer is identified, it is time to set up a buyer/seller meeting. The service of business brokers proves incredibly helpful at this step. At this meeting, you (the Seller) can get to know the buyer, explain your business, and allow the buyer to ask questions. Typically, the discussion at this meeting remains fairly high level, and sometimes a prospective buyer will want to visit your office or see facilities/equipment. If the buyer chooses to move forward, he or she will present a formal offer that outlines details including the offered purchase price, payment terms, training and transition period, any required employment non-compete terms for you and potentially key employees, and any other conditions related to the offer. You will need to thoroughly review the details and then accept, reject, or negotiate any aspect of the offer. Professional representation makes all the difference in all of these meetings and negotiations, beginning with identifying the buyer.
At Viking, we vet potential buyers through our pre-screening process, ensuring a buyer is serious and financially capable of purchasing your business before ever presenting them to you for consideration. That means no time wasted on meetings with buyers who are not actually viable prospects. Your broker is then present at the buyer/seller meeting. If the buyer wants to see your business’s facilities, the broker can help you schedule this sort of visit “after hours.” Many buyers also wish to perform a more detailed review of the business’s financials after the meeting; but remember that no offer has been made at this point and your confidentiality remains the utmost priority. If the buyer wishes to see more detailed financials, we insist that any financial review is done only while in Viking’s office. Moving forward, if and when an offer is made, our business brokers will meet with you to explain the offer and discuss its various components in detail. The decision to accept, reject, or negotiate is yours; but your broker will offer an expert opinion and guidance to help you make the right decision for you.
3. Due Diligence & Closing
After you accept an offer from a buyer, the buyer uses the time prior to the closing to perform their due diligence. Due diligence normally involves obtaining detailed financial statements, copies of contracts you may have with suppliers or customers, etc. The objective of the due diligence period is to confirm that your business was accurately represented to the buyer prior to them issuing their offer letter. Most buyers are not looking for minor discrepancies, but rather only for material differences or “surprises” that were previously unknown to them. The length of this period (and level of detail) can vary greatly and is generally dictated by the buyer. Then, after due diligence and buyer financing are completed, closing documents must be drafted for the close of the sale, which include a great number of agreements and legal documents.
Good business brokers (like those at Viking) remain with you during every step in the process, including the due diligence period and closing. During the due diligence period, your broker will counsel and assist you wherever possible. Another critical benefit of having a broker is that, while most deals that get to due diligence proceed through to closing, we also realize that your business is not sold until the sale has officially closed. So, even as the prospective buyer performs their due diligence, our business brokers continue to collect new inquiries in order to keep the sales pipeline open. Then, in preparation for closing, your broker can recommend legal counsel (attorneys) and financial counsel (accountants) to help you with the various contracts and legal documents and to ensure you minimize the tax impact of the sale. Your broker will also ensure that you collect your funds and have all of the documentation you need when you leave the closing table. Normally, with professional representation, the time from offer acceptance to closing (including due diligence, drafting of sales contracts during pre-closing, and the closing itself) ranges from 60 to 75 days, but can vary of course.
As we mentioned above, yes, it is possible to sell your business without professional representation. But, if you want to protect your confidentiality, save time and effort, and sell your business for top dollar, your sale is worthy of a professional advisor. Our business brokers have decades of experience and know how to sell a business. Business brokers can help you avoid common mistakes, give you actionable insight on how to maximize the value of your business, and guide you through the process. If you are thinking of selling your business, we are here to help. Contact us today for a no-cost consultation, where we can provide an estimation of what your business would likely sell for and how long it might take to complete the transaction.