How to Sell a Small Business Without a Broker (Step by Step)

How to Sell a Small Business Without a Broker (Step by Step)

Either way, remember that valuation is just a guideline. Your buyer is, in the end, the one who determines the value of your business when they decide what they’re actually willing to pay. The buyer is also looking to make a profit, which means that the amount they’re willing to pay will typically be somewhat less than the estimated value. Go into negotiations with an understanding of how much you’re willing to compromise on price.

3. Qualify potential buyers

This next step might not seem important if you’ve already got a buyer lined up, but interest isn’t enough to run a successful business. Moreover, you owe it to the business you’ve built, your own reputation as a business owner, and any employees you have to make sure that the person buying your business is qualified to run it going forward.

👉 There are a few questions you should ask right when an offer is made:

Do they have the means to buy your business?

In most instances, buyers will need to finance some portion of the purchase through a loan. Don’t be shy about asking what loan they’re going to use and whether they’ve been pre-qualified for that loan.

What is their experience and background?

Have they run a business before? Do they have the technical and managerial experience needed to make it work? Do they understand your industry well enough to work in it? Ask these questions upfront and don’t be afraid to ask for a resume to confirm it.

Why are they buying your business?

If the buyer doesn’t intend to keep the business running long-term or isn’t interested in keeping your current employees during the transfer, you might want to find a different buyer.

Vetting your buyer with these questions can help you ensure that your business is in good hands going forward.

4. Draft and sign a Letter of Intent

A Letter of Intent (LOI) is a document that establishes a buyer’s intent to purchase a business, along with the terms and conditions of the sale.

👉 There are several key things to include in an LOI:

  • Your full name and the full name of your buyer.
  • The nature of the purchase.
  • The period of exclusivity that exists for negotiations (how much time the buyer has to complete the purchase before you seek other buyers).
  • Assignment of responsibility for various costs involved in the sale (establishing who pays what).
  • A withdrawal clause allowing the buyer to back out of the transaction at any time if they’re not provided with the expected gains.
  • Closing conditions for the transaction.

An LOI may also be preceded by a confidentiality agreement to keep the details of the sale private. Check out the BDC guide to LOIs for more information. You can also find Letter of Intent templates online, though I strongly recommend working with a lawyer to draft



This article was written by Dianna Gunn and originally published on CodeinWP.

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