With apologies to all the business brokers out there who would tell you otherwise, our answer to the question, Can you sell your business without a business broker? is “Absolutely.”
How is this possible? How can you sell your business in Maryland without a broker to buffer the sales process?
Brokers sell businesses to third parties (people or companies) that owner- sellers typically don’t know. Third parties are certainly one category of buyer, but what about all the others: friendly competitors, employees, co-owners and family members?
Have you considered all of the possible buyers for your business? Buyers that aren’t even on a business broker’s list?
With a little prompting from us, our client “Joe” did.
Casting A Wide Net For Buyers May Mean Leaving the Broker Behind
For the past 25 years, “Joe” owned and operated a successful residential and commercial flooring company. He’s always been active in both flooring and homebuilding trade associations by attending both annual meetings and, on occasion, serving as an officer or board member. As his experience level grew, he even mentored younger owners (introducing them to specialty manufacturers, etc.) located in other cities. In return, the younger owners (Joe called them “kids”) helped Joe with strategies to improve his company’s online presence and grow his online sales.
When Joe started to think about selling his company, he called us to see if we would recommend a business broker who could help him. Instead, we asked if he’d be willing to come in so we could learn more about what he wanted his the sale of his business to accomplish and make the best recommendation.
At our meeting, we started where we always do: how much money did Joe think he needed from the sale to achieve financial security? We noted the dollar amount Joe had in mind and set it aside for a moment.
Our next question was about who he wished to sell to. Before we could list his options, Joe responded, “A third party of course. That’s why I need a broker!”
How to Determine If You Can Sell Your Business without a Broker
Seeing all your options for potential buyers is a key component. That’s why we created a list of all the buyers who might acquire Joe’s business. On that list, we inlcuded companies in adjacent industries, competitors, key employees and even those “kids” he had mentored. (If Joe had had a co-owner or children, we would have included them as well.)
We could see in his face the surprise. He hadn’t thought about all of these as legitimate options. It was starting to become apparent how he could sell his Maryland business without using a business broker.
Joe told us that his primary sales guy (“Jeff”) was the only employee that could run the company without Joe at the helm. Still Joe doubted that Jeff had the money to buy the company and even if he did, Jeff was probably only six or seven years from retirement. We crossed “employees” off Joe’s list.
While Joe thought about the other possible buyers, we returned to the dollar amount that Joe wanted from his business.
A Buyer Outside of a Broker’s List: The Value They See In Your Business Might Surprise You
Joe had answered our question about what he wanted with the value he thought he could get. As it turns out, that value was based on an industry rule of thumb.
At that point, we recommended that Joe get a preliminary valuation on his company. As is the case with most owners, Joe objected, insisting that between the industry rule of thumb and his understanding of his numbers, he could “ballpark” his company’s value.
Ultimately, we convinced Joe that industry rules of thumb aren’t as reliable as owners think they are, and that a preliminary valuation (much less costly than a full-blown valuation) would be worth what he paid and more. Besides, how could he really know that the asking price a broker would put on his business (if he decided to hire one) was really accurate?
At the end of our meeting, Joe told us that he would float the idea of a sale to two of the “kids” he had mentored at the national industry conference scheduled two months from then. “That timing is great since we’ll have a preliminary valuation in hand by then,” we noted.
Finding A Buyer That Meets All Of Your Goals
Three weeks after returning from that conference, Joe sat down with us again. He told us that the first “kid” he had approached had politely declined since he’d just invested in a regional expansion. “But the second,” Joe said, “was so interested that she scheduled a trip to see my operation the following week.”
“Take a look at this offer,” Joe said as he pushed a letter of intent across the table. We looked, and looked again because the purchase price exceeded the valuation we had recently received.
“Joe,” we began, “this number will likely change as the buyer digs into your financials, but it is a great start! An attorney who specializes in acquisitions would be a great asset to you at this point. We’ve got one in mind who not only has the expertise, but also the problem-solving mentality to help you move through this process as smoothly as possible. Let’s set up a meeting.”
Ultimately Joe sold his company to this friendly competitor for a price that not only satisfied his financial security goal, but also his other goals of keeping his company in his community and his employees on board. And he did it all without ever hiring a broker.
How You Can Find Your Options: Selling Your Business Without Using a Broker in Maryland
There are other ways to sell your business without a broker in Maryland. Using a broker to sell your business is not your only option!
Co-owners, key employees, competitors and family members are all viable options if you start planning these transfers well in advance of your business exit and you work with an advisor who knows how to structure them to avoid the typical pitfalls.
- For more information on transferring your company to family members see Family Business Transition Planning – Washington, DC.
- For more information about selling to employees see Is Selling Your Business To Employees The Right Move? The Benefits and Downsides of Making An Employee A Buyer.
As a business owner, you have more exit or buyer options than you may think. We’re happy to show you your options–it’s what we do! Just know that the more time you take to plan your exit, the more options you have so there’s no better time to start than today.
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