After making the essential preparations to sell your business, you will need to cast your mind to finding the right buyer. Although this can often seem daunting, if you master your pitch and have the right professionals by your side, you can make the process much smoother. There are different streams to use to find the right buyer. This article explores:
- utilising existing networks;
- finding the right broker; and
- advertising and listing your business.
When you are ready to sell your business and begin the next chapter, it is important to understand the moving parts that will impact a successful sale.
This How to Sell Your Business Guide covers all the essential topics you need to know about selling your business.
Utilising Your Existing Networks
Through your career as a business owner, you will build professional connections. When looking to sell your business, you should never underestimate the potential that lurks within your existing network before progressing to the advertising stage. The types of buyers you may already have within your network might include:
- key employees;
- suppliers; and
- competitors.
Key Employees
Existing staff, such as senior managers, can often be an excellent place to source a purchaser. Your existing key employees are often in the best position to understand what makes your business the business it is. Senior managers often possess in-depth knowledge of your business’ day-to-day and strategic functioning as well as existing relationships with your business’s stakeholders. This may put your strategic stakeholders at ease, making for a smoother deal.
If you agree to sell your business to a key employee who cannot afford to finance the purchase at your asking price, you can always consider providing vendor financing.
Suppliers
The suppliers you use and have developed relationships with are often uniquely positioned to know your industry. Some of your suppliers may see your business as an opportunity to vertically integrate. It is not uncommon to see suppliers undertake radical restructuring when they vertically acquire their customer’s assets as they absorb your business’ assets into their existing structure. In such instances, the purchasing supplier will not be operating your business in a way that resembles how your business operated and might not then be interested in purchasing your trademarks and goodwill.
Competitors
Although it can come with a sting, your competitors can be a viable option as they know your industry and its key risks. One of your key risks will be exposing your sensitive information without any guarantee that your competitor will go ahead with the purchase. While you can put in place non-disclosure agreements, this is by no means a foolproof way of protecting your sensitive information.
Business Brokers
A business broker is very similar in concept to a real estate agent. Brokers are in the business of selling businesses and, therefore, are well-connected and attuned to finding the right buyer. Engaging a business broker is commonly the first point of contact in the journey and can take much of the work out of selling your business.
When you have approached a business broker, you ask the following key questions in determining whether they are suitable for you and your business:
- What is your experience in selling business in my industry?
- Have you sold any business like mine?
- How will you be discrete to prevent my customers from hearing about my potential sale?
- Do they require you to engage them exclusively?
- What marketing strategies will you use to find a buyer?
- What costs are involved?
- How much commission do you charge?
- How much will advertising cost?
Listing Your Business
Listing is a common method for advertising the sale of small and medium-sized businesses. You need to make sure you have a great pitch and highlight the main features of your business, which is crucial to increasing interest and online traffic.
You should ensure that your business listing includes the following details:
- clear and to the point heading;
- multiple photos of professional quality;
- summary of the business (maximum three sentences);
- price (including whether you are open to negotiation on the price); and
- contact details.
Pitching to Entrepreneurs
As you might remember from your business journey, the wave of excitement of starting something from scratch can be dampened by the realities of planning, securing financing, complying with regulation and general governance. As a result, there has been an increasing trend for entrepreneurs to purchase existing businesses within a sector rather than start a new business from scratch. This strategy will give such buyers income from day one as well as easier access to lines of credit.
With this in mind, you should not rule out looking to your networks and online forums to connect with aspiring entrepreneurs. However, like with any prospective buyer, it is always crucial that you ask the right questions to discern serious and professional buyers from non-serious buyers.
Key Takeaways
Preparing for a business sale involves finding the right buyer. As a vendor, you should consider using different streams to find the right buyer, including:
- utilising existing networks;
- finding the right broker; and
- advertising and listing your business.
If you need help with your business sale, our experienced sale of business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Instead of starting from scratch, you can reach out to key employees, suppliers and competitors to see if they are interested in purchasing your business.
Business brokers are in the business of selling businesses and are well-connected and attuned to finding the right buyer. Engaging a business broker is commonly the first point of contact in the journey and can take much of the work out of selling your business.
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