Four Ways to Sell a Business: Exploring Your Options
Selling a business can be a daunting task, but it's something that most entrepreneurs will consider at some point. Whether you're looking to retire, move on to a new venture, or simply cash out, there are a number of different ways to sell your business. Each method has its own advantages and disadvantages, so it's important to understand your options and choose the one that's right for you.
The four most common ways to sell a business are:
Broker Sale
Brokers are middlemen that help business owners sell their companies. They can help prepare your business for sale, find potential buyers, and negotiate the terms of the sale. The downside is that you will pay a commission to the broker, which can be a significant expense.
Brokers can be a good option if you don't have the time to handle things. The downside is that you are handing over control of your sale, and it might not get you the best possible outcome. You may also be required to pay an abandonment fee if you decide not to sell or wish to postpone your exit.
Direct Sale
One of the most straightforward ways to sell your business is a direct sale – a process far easier than many business owners realise. It also cuts out expensive brokers or agents.
From preparing for sale and finding a buyer, to negotiating the terms and transitioning to new ownership, the advantage of a direct sale is that you have control over the process, There is no other party motivated to close the deal in order to get a commission, which may not always be in the best interests of you or your business.
With a direct sale you can go it alone, or you can work with an advisor. Either way, it significantly more cost effective than going through a business sale broker, usually saving tens (or even hundreds) of thousands of pounds.
Like with any successful business exit, direct selling requires a good understanding of the process and planning of the sale. I’d strongly recommend using a trusted advisor, as you could leave a lot of money on the table without one, or not get the most favourable terms. It will pay for itself. If going it alone, just ensure you learn as much as you can about the process, preparation, negotiation and terms. You’ll need a lawyer and accountant regardless.
Passive Sale
Often used by smaller businesses, passive selling includes advertising your company on business for sale type websites and letting buyers find you. This approach requires the least amount of effort, but is also the least effective.
Research shows that around 80% of businesses for sale will never sell. This is not because they are not viable with future potential, but rather because they have not planned their exit, maximised value, presented their company in the best way, and proactively found potential buyers.
Passive selling does have some merit though, and we believe it can be a useful method of gaining exposure... especially when part of a wider direct business selling strategy.
Employee Buyout
If you have a loyal and dedicated workforce, you may want to consider an employee buyout. This involves selling your business to your employees, and is usually paid in instalments out of future profits. Known as Employee Ownership Trusts, or EOTs, they are also a highly tax efficient way to sell your stake in your business.
EOTs can be a great option if you want to ensure that your business continues to operate in the same way. You may decide to continue steering the ship. They can, however, be complex to set up and require careful planning to ensure a smooth transition.
Summary
No matter which strategy you choose, it is important to approach the sale of your business with care and attention. It’s likely one of biggest career decisions you’ll ever make. With the right plan, knowledge, and a little bit of luck, you can successfully sell your business and focus on the next phase of your life.
Need help selling your business? Get in touch.
