Selling a small business. This leads on from a previous post called ‘Starting A Small Business’. Our theory is you buy, build and sell a business. It’s more likely you will make much more money selling a business than running one.
Pitfalls when selling a small business are many. We believe if you are going to use a Business Broker to sell your business then it might be best to find one who actually knows how to and follows through with this to the end process of the sale including the Contract of Sale. From our experiences all they do is list your business (which costs a fee) and pass relative financials etc. to prospect buyers.
If yours is a complicated business sell it yourself with aid of a good lawyer and accountant it will cost you less as you will still have use them even with a Business Broker. You won’t have to pay the huge commission then at the end that business brokers expect. Business Brokers have their hands out fairly quickly to collect ‘their’ commission even if it has actually been you that has sold aka closed the sale of the business. Selling a small business can easily be sold by the owner.
Be sure to calculate what you will have to pay a Business Broker in commission for selling a small business and if you sign up with one with a sole agency agreement then press their buttons hard to deliver a full result. Most sole agency agreements are for 128 days. If your business does not sell in that time then cancel the agreement in writing and find another selling alternative.
If you don’t cancel the agreement in writing and you sell the business later down the line the business broker can come back to you and claim the commission. As written into a sole agency agreement is that it can only be ended in writing even if the 128 day agreement period has lapsed. Otherwise they continue on. This should tell you a lot about Business Brokers and why using one is to be avoided if they don’t complete the sale process for you and all that is involved with that business sale. From our experiences they claim commission from just advertising your business only.
If you intend in selling a small business in a transitional sale deal then don’t get caught up in shareholders agreements. Only the Contract of Sale carries any real weight. Also be very careful with Vendor Warranties. Final settlements of Contract of Sale can sometimes be messy if your buyer is a control freak and wants to claim Vendor Warranties because there are clauses written into the agreement about Vendor Warranties. Control freak buyers will do this.
You can easily list a business for sale by yourself. There are plenty of websites to do this with and other forms of media advertising. If you have had the entrepreneurial flair to run and manage a business successfully, then you have the entrepreneurial flair to sell a small business as well. Good luck selling a small business!