Why you should try to sell your business yourself

While trying to sell your business yourself seems like a good idea - oh, the money you’ll save! - the truth is, there is an endless list of things that could go wrong and prevent you from closing a deal. It happens all the time. In fact, according to the Exit Planning Institute, over 70% of private businesses that actively engage a true selling process fail to be sold.

It turns out that for those owners and founders who are genuinely interested in selling their businesses and finding the best deal, that old counterintuitive adage applies: money spent is money earned. And in those cases, we believe that engaging the right investment banker is likely to return your IB success fee back for you in multiples.

Incidentally, the highest bidder does not always make “the best deal.” The letter of intent (LOI) in any offer has to be competitive; however, deal structure and “the right fit” are equally important. Identifying the optimal buyer for you and your company and your loyal employees and clients is difficult. The stakeholders are multiple, and successfully navigating all of the nuances of a transaction is challenging.

Let’s face it, if you don’t sell businesses as your day job, you probably are not the best solution for selling your own business. You may have two knees, but if you need a new one, you likely aren’t qualified to get yourself up and running again. Likewise, even if you “know” who the buyer is going to be, what are the odds of striking the best price and terms absent an auction process and a strong advocate on your side of the table? Further, while you work to learn the selling process, who is going to keep your business running in top form to ensure the financials at closing align with the Confidential Information Memorandum (CIM) which you created in the beginning of the process? Beware purchase price adjustments and working capital adjustments in the eleventh hour.

The point from 30,000 feet is that in the same way no one outside your industry can sidle in and execute your business as well as you and your team can, successfully selling private companies is time consuming, complicated and takes another kind of expertise owners and founders likely don’t possess. Hence, when selling your business, the money spent for the proper expertise is money earned in the final sale.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Banyan Partners and not necessarily those of Raymond James.