Contrary to popular belief, you don’t need a broker to sell your business.
Selling a small business is no small thing, of course. You’ve put in years, even decades of hard work into this. You want a fair valuation, and ideally, a quick, easy, and organized process.
TL;DR:
- Selling without a broker generates higher returns, usually happens quicker if you’re sale-ready, SBA-approved, and have a rough idea of your target exit valuation;
- For off-market businesses, selling without a broker will save you time and money, and could result in a better sale price for all of your hard work.
- There are several things you can do to prepare your business for sale if you don’t want to use a broker.
Trying to find a broker takes a lot of work, and it could take months for a broker to find a buyer and secure the sale. Plus, you’ve got fees to factor in ⏤ brokers will take anywhere from 10% to 20% of the sale price of a business.
Working with a broker could see you walking away with a lot less than the top-line sales figure, and that can be very disheartening after years of hard work and sacrifice.
Instead, work with a dealflow sourcing partner who will only connect you with serious, interested buyers who are ready to make a purchase with cash-in-hand or other financing arranged. Avoid the stress of dealing with brokers. Save yourself time and money.
Let’s dive in . . .
Sell Your Small Business to Organized Buyers, Zero Brokers Fees
Selling a business is more complicated than selling a house or a car.
With a house, car, or any kind of tangible asset they usually have a fixed valuation. With some wiggle room; but generally speaking, what something is valued at is within the ballpark of what it sells for.
Businesses are different. Everything up until the point of the money and ownership being transferred is negotiable. One buyer’s perception of the valuation, or what they’re willing to pay, may differ from another’s, especially in off-market sales. That’s why brokers get involved. There are other ways to sell your small business without a broker.
Getting your business ready for a sale is a crucial part of the process. When you’re prepared, the sale can go through smoother when you’ve been introduced to an equally motivated buyer.
Here are the seven steps for selling your business without a broker:
- Decide if a sale is your desired exit route
- Ensure your business is sale-ready
- Get a fair market valuation
- Have an idea of who you want to sell to/what type of business?
- Talk to your lawyer: Have an NDA and Confidential Information Memorandum (CIM) prepared
- Talk to your accountant (CPA): Have sale-ready accounts prepared you could share, including current cashflow, cash-on-hand, and receivables
- Talk to us at Falcon River
Let’s get into the details . . .
7 Steps To Sell Your Small Business Without A Broker
1. Decide if a Sale is your Desired Exit Route
Before you start the process of trying to find a buyer, you need to make sure this is the right choice. Ask yourself a few questions:
- Am I ready to sell?
- Have I taken this business as far as I can?
- What could I do with the money?
- What do I want to do next? If you’re retiring, then a sale is a great retirement plan. Or it could be a way of getting money for a big life event, such as buying a house, traveling, starting a family, or founding a new (different) business.
- What type of exit do I want: Cash in and walk away, or a vested exit whereby I work for the new owner for a pre-defined period, and then walk away with the final cash payment?
Talk to your loved ones, friends, family, life or business coach, and even your therapist.
Once you’re sure, then it’s time to get the ball rolling.
2. Ensure your Business is Sale-ready
You might be wondering, what’s a “sale-ready” business?
Not every business is in a perfect sale-ready condition. With off-market sales, even a distressed valuation and sale is possible, if there’s a motivated buyer who can see the potential of a business.
However, in most cases, a sale-ready business is:
- Profitable, with a healthy profit margin, and a low level of liabilities.
- Has revenue from one or more sources, and that revenue is on a growth trajectory.
- Is pre-qualified for a seller-financed SBA-guaranteed loan (Small Business Association).
- Has processes and systems (and a team, if needed) so that it’s not reliant on the founder/owner to operate.
- Has tangible assets to sell, whether that’s a website or app with branding and a customer database, or other forms of intellectual property (IP) or competitive advantages that are being monetized.
- Has potential. This is an intangible in the mind of the buyer. If you’re selling for $1 million and a buyer sees the potential for your business to reach $100M they might be more willing to buy for a higher price.
3. Get a Fair Market Valuation
Getting a fair market valuation is so important.
Maybe you’ve already got a plan for what to do with the money and there’s a minimum valuation you need to secure.
How to value a business without a broker could involve a do-it-yourself (DIY) approach, or you could use a professional valuation analyst. There are also valuation calculators that could prove a useful starting point.
A valuation should take into account the following:
- Revenue: Monthly and annual recurring revenue (MRR, ARR)
- Number of revenue streams
- EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortisation
- Profits, the profit margins, and the P&L (Profit & Loss) accounts
- Discounted cashflow: How much revenue could bring in 1, 2, and 3 years from now?
- Processes and systems: Is this setup to operate without the founder?
- Assets and liabilities can include everything from debts to the value of the website, traffic, rankings, and any customer databases, etc.
- Comparable valuations for businesses doing similar revenue and profit numbers in the same sector. In other words, if you know of a competitor that sold, do you know how much, and can you find out? If so, that could help in a valuation.
In most cases, sellers like to try and secure a multiple on the current year’s revenue, such as 2 or 3X ARR. Although, numerous factors could increase or decrease this, so aim for the best you can and potential buyers can afford.
4. Have an Idea of Who you Want to Sell to/what Type of Business
It could be that you’ve already got a potential buyer in mind. Maybe a larger competitor or someone in your sector you admire but don’t have a relationship with.
It could help to have a third-party vet them, check if they want to buy a business, enquire about their budget, and then do an introduction. That way, you aren’t wasting time on a non-starter.
Or you’re completely new to this, and need a guiding hand and introductions but don’t want to incur the cost of a broker.
In which case, we can put you in contact with a vetted pipeline of Private Equity (PE) firms, business aggregators, and serial entrepreneurs who are already interested in and ready to acquire a business like yours.
5. Talk to your Lawyer: Have an NDA, and Confidential Information Memorandum (CIM) Prepared
You could find templates online or have a lawyer prepare these documents. It’s important to have the following ready for the sales process:
- A Non-disclosure agreement (NDA).
- Confidential Information Memorandum (CIM): So you can share financial and other information in confidence.
- A Letter of Intent (LOI): Don’t start due diligence without one signed, otherwise you risk a potential buyer making an offer that’s much lower than you want after going through what should be the final stage of the process.
- When the deal is looking likely, you will need other agreements such as a Definitive Agreement, a Non-Compete Agreement, and others as required.
6. Talk to your Accountant (CPA): Have Sale-Ready Accounts Prepared you Could Share, Including Current Cashflow, Cash-on-Hand, and Receivables
Next on this list is to have sale-ready accounts prepared you can share with potential buyers.
These documents should include:
- Current cashflow (projections might be needed too);
- Cash-on-hand, and receivables (should be in the same spreadsheet; although current bank statements might be requested too);
- Profit & Loss account (P&L);
- Balance sheet, showing assets and liabilities;
- Anything you’ve submitted to the Internal Revenue Service (IRS) over the last 3 years (if applicable).
7. Talk to us at Falcon River
At Falcon River, we work with individual buyers, such as Private Equity (PE) firms, business aggregators, and serial entrepreneurs to identify target businesses and reach out to potential sellers on their behalf.
Falcon River specializes in online businesses, such as software companies (SaaS), eCommerce, direct-to-consumer (DTC), apps, Shopify stores, franchises, Amazon stores, and niche websites.
Providing the business is sale-ready and the potential buyer interested, motivated, and is purchase-ready, then deals can happen quickly. We don’t take fees from sellers, and we help both parties throughout the process to ensure it reaches completion.
How to Sell a Small Business Without a Broker? Questions We Hear All The Time
Whether you sell with us, a broker, or find a buyer yourself, you don’t need to have every duck in the row before starting the process.
It certainly helps to be prepared. However, as long as you’re organized for due diligence ⏤ as that’s the only way any business gets sold ⏤ then anything a buyer asks for can be sourced during that process.
Numerous factors could impact the cost of selling a business. Ideally, it shouldn’t cost you too much, and in reality, you’ll recoup those costs providing the sale goes through. So, any money spent is a short-term cost for a long-term gain.
If you sell through Falcon River there are no brokers fees. In this case, the only costs could be:
You might need a professional valuation done by a professional valuation analyst. If that’s the case, it could be to help the buyer secure finance, such as an SBA-guaranteed loan (Small Business Association).
Your accountant (CPA): Have sale-ready accounts prepared, including current cashflow, cash-on-hand, and receivables. Your buyer might also need bank statements, the last 3 or 5 years of accounts, and potentially projected cashflow forecasts.
Your lawyer: Have an NDA, Confidential Information Memorandum (CIM), and a Letter of Intent (LOI) prepared. You’ll probably need their advice over the sale, going over the contracts and anything else required, to ensure you’re being advised effectively.
You might also need to take financial or tax planning advice from a financial advisor (or your accountant) to ensure you won’t be hit too hard with capital gains tax.
Assuming everything is straightforward, you could be looking at anywhere from $5000 to $15,000 in various fees to complete a sale, potentially more.
Do keep that in mind before starting the process. But, remember, providing it sells you’ll recoup all of those costs fairly quickly.
How much a business is worth is a question with numerous answers.
There are a few ways to go about it. Online businesses, such as niche websites, could start with a valuation calculator that factors in web traffic, affiliate links, and revenue streams.
However, you also need to factor in and weigh up everything from revenue to profit margins, processes, systems, assets, and liabilities.
Ideally, most sellers like to secure a sale that’s a multiple of the current year’s revenue (e.g., 2 to 3x ARR or more), depending on the structure of the deal.
Key Takeaways: How To Sell My Small Business Without A Broker
Assuming you’re ready to sell and are confident this is the right approach, then follow these steps to sell your small business without a broker:
- Ensure your business is sale-ready. Get everything prepared to promote it, including financials and a presentation document.
- Get a fair market valuation. DIY this or use a professional, and aim to find out what competitors sold for or comparable businesses.
- Know who you want to sell to. It’s better when it’s someone who sees potential and will grow it.
- Have an NDA, Confidential Information Memorandum (CIM), and LOI prepared before the due diligence.
- Have sale-ready accounts prepared you could share, including current cashflow, cash-on-hand, P&L, balance sheet, and receivables.
Work with Falcon River to sell your business: quick, organized, fair, and no broker fees.
