How To Sign Up With The Right Business Broker To Sell Your Business

26th May 2016 by

With hundreds of business brokers around, some with notorious reputations, how do you pick a reliable and competent broker whom you can trust?

Rule 1: You choose the broker, don't let the broker choose you! If you've been cold-called, been "chosen" to attend an event or have otherwise been targeted, walk away! Do so even if they claim to have a buyer for your business (which is possibly a fake claim anyway).

Rule 2: There is no substitute for research. We maintain the UK's largest knowledge base on brokers, their fees, their terms, who's specialised in selling what kind of business, who has exploitative terms etc., but you can do a fair bit of research yourself ... and without paying for assistance to find the right broker. Start with a business broker directory and do research on at least a few dozen brokers before narrowing the choice and deciding on which ones you are going to approach.

Rule 3: If yours is a smaller business, with turnover of less than £1 million, you may be better off selling the business yourself, especially if it's a retail business such as a newsagents, post office or convenience store. Many brokers at this lower end of the market don't do much more than list your business on RightBiz and sit back. That doesn't take a genius and they don't deserve 10% of your company for doing that. Read a few books on selling businesses, talk to a few people (maybe even take up our offer of a free consultation by using the contact form on our website). Then create your own RightBiz listing.

Rule 4: Talk to several brokers before you make your choice. Most will take the time and trouble to come and meet with you. Take them up on that, have a long list of good questions to ask, and grill them on what they'll do for you and how.

Rule 5: Read the small print. Then read it again. Then have a lawyer read it to you and explain some of the implications of what are sometimes  harmless looking clauses! Hundreds of business owners have been caught out by these contracts. Ask CEBTA. Don't be one of them.

Alaternatively, check out our service.

All the best with the sale of your business.

Our other articles on RightBiz:

How To Sell A Loss Making Or Insolvent Business:

Loss Making Businesses

All businesses run into problems at some point or the other. If you've hit a loss making year, that's not the end of the world - you buckle down and resolve to do better next year. However, there are sometimes clear indications that losses are likely to persist or that the business cannot be turned around. The earlier you recognise this, the sooner you can start taking action and the larger the price you will get for the remaining assets of the business.

And that brings us to the assets. The assets themselves have value and you can sell the assets of the business on their own (as an alternative to selling the shares). Selling shares and selling assets are explained in more detail here. Ideally, you want professional advice through any such restructuring or disposal. There are several potential traps. For example, if the business is "technically" insolvent, selling the assets off could land an owner in serious trouble.

So how do you go about finding a buyer. You could advertise the business for sale online, of course but, given that there are not a lot of buyers looking specifically to buy just business assets, it may be worth identifying potential buyers yourself and making the approach directly or through a business broker.

But what if there are no assets or the assets are of minimal value. You are then left with just the accumulated losses which can be converted to cash. However, HMRC are not keen on businesses doing this and the law places several hurdles in the way of a business owner who wants to sell his losses. Please see our explanation here on how to value such losses and what the law says about utilising such losses by selling them to another firm.

Insolvent Businesses

When a business runs into financial difficulties, there are often ways to tackle those problems and restore the business to profitability. It may require a fresh injection of capital or some new blood. However, if there is no management appetite to turn the business around, management need to act swiftly once they realise the business is insolvent. It is a legal requirement for directors to not trade while insolvent.

There are several other responsibilities that fall on directors in an insolvency situation. For one, they can't prefer any creditors over any others. So if the company owes money to a director in the form of a director loan, such monies cannot be extracted prior to filing for insolvency.

However, there are several options to convert the existing assets and goodwill into cash and professional expertise is available to assist. Our article on selling the insolvent business may be a good point to start research.


How To Convince Buyers To Buy Your Business

Most entrepreneurs, skilled though they are at their own businesses, have next to no idea about how best to appeal to investors. What they think works in their Information Memorandum is actually working against them. Here are some tips from our article on how to convince investors to buy your business:

1. Don't hard sell. That puts investors off. Learn, instead, how to tell your story well. There are numerous good articles advising on how to put together a killer memorandum. Spend some time reading them and learning what works.

2. Don't praise yourself, your location, your fanastic website etc. You are selling the business, not yourself. In fact, praising yourself runs counter to what you're trying to achieve here. The more you paint yourself as critical to the business, the less the investor interest in taking over a business that's going to lose you.

3. Get a professional to write this document for you. Even if you don't hire a business broker to represent you in this transaction, hire a competent one to put together your documentation; it'll make a big difference.

4. Avoid hockey sticks - those charts which show an explosion in growth / turnover / profitability after the business changes hands.

5. Don't play hard to get eg "We may be persuaded to sell if we get a good enough offer"

6. You may think your numbers add up, but they probably don't. In 90% of IMs there are serious flaws in the numbers. See some examples of inadvertent mistakes here.

7. As obvious as this sounds, avoid punctuation, grammar & spelling mistakes. Have a third party proofread your document.

8. Compare your financial ratios with similar businesses to make sure they don't look odd, unrealistic or dangerous. They'll lose you some buyers.

Read the rest of our tips here.

Rate this article Sign up to rate this article
This article was published by Business Exits
Business Exits
01268742944Sell Business »Free Valuation »