Is it possible to sell a business without a broker?
You bet. We’ve seen many examples of founders who’ve done this successfully!
In this post, we’ll share how to sell a business without a broker, including examples of strategies we’ve seen work for founders.
But first, we encourage you to ask yourself: Why do you want to forgo a broker — or M&A advisor, as they’re often called – for your sale?
Most founders who want to sell their business without using a broker are looking to avoid hefty fees.
If you’re looking to sell for less than, say, $500,000, this can be a smart approach. At that deal size, broker fees — which are typically based on a percentage of the sale price — would eat up a significant portion of your sale proceeds.
However, if you’re selling for more than $500,000, sometimes it makes sense to use an M&A advisor or broker, despite the fees they charge. That’s because a good M&A advisor can help you get a better deal, so you’re happier with the outcome of your sale. If you end up wanting to consider this, we’ll match you with a trusted advisor for free.
We’ll review the benefits of working with a broker at the bottom of this post. For now, here are eight tips for selling your company without using a broker or M&A advisor.
How to sell a business without a broker: 8 tips to make your sale go smoothly
Here are a few tips for what to do — and what not to do — if you’re considering selling your business without the professional support of an M&A advisor or broker.
1. Get a valuation for your business
At the start of the process, you want to make sure you truly understand what your business is worth.
It’s common for founders to have unrealistic expectations, thinking their company will sell for more than it’s actually worth. This can make selling tricky.
Some founders make the opposite mistake, undervaluing what they’ve built because they don’t realize how much a buyer might be willing to pay.
So you want to have a valuation in hand to ensure you pursue the best possible offer. Valuations can also help sellers justify requests along the way.
You have two basic options for getting an accurate valuation:
A) Free valuation: If you’re at all considering working with an M&A advisor, most advisors prepare a free or low-cost valuation for clients at the start of their process. There’s typically no commitment, and getting this valuation will give you insight into how a buyer might see your business.
If this sounds appealing, ask us for a recommendation for an advisor who has experience with your type and size of business.
If your business revenue is less than $500,000, you might also consider asking a marketplace for a free valuation. Popular marketplaces like Empire Flippers and Flippa are good places to start.
B) Valuation at a cost: Otherwise, if you want a stand-alone valuation, you’ll have to pay for it. The cost varies depending on the size of your business and how deep the firm has to go to do it well.
If your revenue is in the 6, 7, or low 8-figure range, work with an M&A firm on a one-off basis to get a valuation. BizNavigators and FE International both offer valuations as a one-off service.
If your revenue is more than low 8-figures, you’ll want to work with an investment bank for a detailed valuation. (This varies a bit by type of business. SaaS businesses, for example, tend to sell for higher multiples, so a 7-figure SaaS business might qualify to work with an investment bank.)
2. Work with a lawyer to protect yourself
And not just any lawyer. You want a lawyer who specializes in M&A.
Don’t let the lawyer you use for employment contracts or other operational agreements convince you that they can shepherd you through your sale. Ask your network for recommendations for an M&A lawyer, or ask us, and we can put you in touch with M&A lawyers we recommend.
The best time to get a lawyer is not when you have a purchase agreement in hand. You want a lawyer long before then. In fact, one of the biggest mistakes founders make is signing an LOI (letter of intent) before having a lawyer review it.
While an LOI technically isn’t binding, it sets expectations around the terms of your deal, and those can be difficult to change later. You have the most leverage before you sign the LOI, so find a good M&A lawyer to work with before then.
3. Pitch buyers directly yourself
We’ve heard from lots of founders who’ve sold their business by pitching ideal buyers directly. This is a tactic that can actually work!
This post offers examples of emails founders used to reach out to buyers that resulted in a sale:
The tricky part, of course, is figuring out who might want to buy your business, and then negotiating so you get a favorable deal.
In an ideal world, you’d have more than one offer, so you can leverage that competition and use it to increase the sale price or improve the terms of the deal.
So if you’re pitching buyers yourself, don’t stop once you get a bite. Keep pushing until you hook at least two interested buyers.
4. Attract a buyer’s interest
What if a buyer approaches you about selling your business?
Often this happens to founders when they’re not even thinking about selling, and it prompts them to start considering it.
Being approached by a buyer is one of the most common ways founders sell. And many founders in this situation — at least those selling for 6- or low-7 figures — don’t use a broker. (The bigger your business, the more it makes sense to work with an advisor, even if a buyer approaches you.)
If you find yourself in this fortunate situation, don’t make the mistake of selling to the first buyer who knocks on your door. As we mentioned above, the best way to increase your sale price is attracting more than one offer.
Getting approached by buyers has both perks and drawbacks. Buyers who reach out often cast a wide net, looking for anyone who will bite, and sometimes these types of offers end up in disappointment.
But on the other side of the spectrum, sometimes a buyer will reach out to a specific company they’re interested in for strategic reasons, and when that’s the case, you’re positioned well to land a higher-than-average sale multiple for your business.
Unless the buyer who approaches you is offering well above market value for your business because they have a strategic interest in the company, you might be better off running what’s called a “process,” whereby you give other buyers the opportunity to indicate their interest as well.
Some founders who have interest from a buyer still use an M&A advisor, both to drum up additional offers and to navigate the sale so you can get the best possible outcome.
5. Consider selling through a marketplace
Selling your business through a marketplace is another way to avoid hiring an M&A advisor or broker. Marketplaces typically charge lower fees than advisories and brokerages.
We usually only recommend the marketplace approach for smaller businesses, those under around $500,000 in revenue. But many marketplaces do sell businesses with millions of dollars in revenue, and it can be an opportunity to get in front of a wide variety of buyers.
In return for low fees, you’ll be in charge of reviewing all inbounds from interested parties and identifying tire-kickers so you don’t waste your time with buyers who aren’t serious. While this can be time-consuming, many founders have seen success selling through a marketplace.
6. Attract more than one interested buyer
We mentioned this above, but it’s worth harping on: You want more than one buyer who’s interested in buying your business, so you can leverage that competition to drive up the sale price.
This is the No. 1 mistake founders make who decide not to work with an M&A advisor or broker. Founders think one offer is enough, when in reality, you might be leaving money on the table.
Whether you have to pitch more buyers directly or consider working with an advisor to drum up more interest, do whatever you can to bring in competitive offers.
7. Lean on friends who’ve sold their business
Some founders who choose not to use an M&A advisor say they had friends who’ve exited to lean on for advice. If you have a friend who has sold their business and is willing to guide you through the process for free or a nominal fee, this could be a good option. Or maybe you know an exited founder who does coaching calls with business owners looking to sell.
For some deals, this can be a good-enough replacement for an M&A advisor. But these types of people can be challenging to find, and of course not everyone has exited friends in their network.
Plus, most exited founders who want to help others sell end up launching their own advisory firms, because taking a cut of a sale is so much more lucrative than charging on an hourly coaching basis.
If your deal is simple — or very small — advice from a friend might suffice. But the bigger your company, the more is at stake, and the more sense it makes to consider professional help.
8. Don’t dismiss brokers entirely
While it’s possible to run your own sale, and that might be the best approach for you, don’t make the mistake of dismissing the idea of working with a broker just because you’ve heard bad things about brokers or because of the cost.
Yes, there are certainly some bad actors out there! But there are also plenty of M&A advisors who have a great track records and the best interests of their founder clients in mind.
The truth is, for many companies — at least those with more than $500,000 in revenue — it’s smart to work with a broker, despite the fees.
Yes, they’ll help you find buyers. But M&A advisors do so much more than that.
Here are the other benefits a good M&A advisor brings:
- They’ll help you negotiate terms, including details like how much cash you get paid up front and how to reduce risk during an earn out
- They’ll do some of the heavy legwork for you, like vetting potential buyers to see if they truly have the funds to invest
- They’ll walk alongside you through the process, which should reduce your stress
- They’ve done this many times before, so they can help you spot and avoid red flags
- Ultimately, they might also help you get a better deal, which could even cover the cost of working with them
But — and this is a big but — this part is vital: Do not work with just any broker! We’ve all heard broker horror stories, and they’re real.
If you want to explore working with an M&A advisor, interview several advisors who come recommended, with a focus on those who specialize in selling your type and size of business.
Ask your network for ideas… or ask us! We offer a free service for founders that matches you with good-fit M&A advisors. Here’s where to request an introduction:
How to find a business broker that’s right for you
Need help finding a broker to sell your business? We can match you with a vetted broker, M&A advisor or investment banker who’s a fit for your type and size of business.
More tips for working with brokers and M&A advisors
It’s smart to learn as much as you can about this before committing one way or the other.
Here are a few other posts we’ve published about selling a business with a broker:
- Should you work with a broker? Here’s what to consider
- Top mistakes founders make when working with an M&A advisor
- How much M&A advisors charge (coming soon)
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