How Do I Sell My Business?
You’ve spent years of hard work and dedication building a business and are now ready to sell it. How do you go about doing that?
There are two options: selling the business yourself or hiring a broker. Below, I will cover when it makes sense to sell your business yourself vs. selling it through a broker and the pros and cons of each.
Selling your business by yourself
Selling your business by yourself makes sense when it is on the smaller side. As a general rule of thumb, this means your business generates less than $2 million in annual profits. When this is the case, you are typically selling the business to a family member, a current business partner, an employee, or a wealthy individual.
Pros
- No broker fees
- Tends to be quicker
- Involves less due diligence
Cons
- Not maximizing the price of the sale
- Less flexible deal structures
Selling your business through a broker
Selling your business through a broker makes sense when your business generates more than $2 million in annual profits. When you are at this size, there is more to consider. It is important that there is a longer-term financial track record and your company is buttoned up from a documentation perspective, such as having commercial agreements with suppliers and customers and having financial statements prepared in accordance with GAAP. All of this extra detail is necessary when selling your business through a broker because often brokers are trying to sell your business to a private equity firm or a larger company in your space.
Pros
- Maximizing the price of the sale
- More flexible deal structures
Cons
- Broker fees
- Tends to be a longer process
- Involves more due diligence
Regardless of the option you choose, selling your business is a time-consuming process. In addition to running the business, you will have to spend extra time preparing it for sale. I write about what you need to prepare to sell your business here.
Selling your business is one of the most important decisions you will make, and hopefully, this framework can help you make the right one.
If you are interested in learning more about selling your business, I cover other topics here in more detail:
