Why You Should Never Sell Your Business Yourself

When business owners consider selling their companies, some may think it’s feasible to handle the sale themselves. As tempting as it may seem due to familiarity with potential buyers, selling a business without professional representation is fraught with risks that can outweigh any potential benefits. The process of selling a company is far more intricate than other familiar transactions like cars or homes. Without the right expertise, the likelihood of failure is significant.

Drawing a parallel to the way most people approach selling cars and houses, it’s clear that expert help is essential. Rarely does anyone list their home without a real estate broker or sell their vehicle directly without the guidance of a dealership. Yet, some business owners believe they can manage the sale of their company on their own. The desire is understandable, but a quick glance at the “graveyard” of disastrous business sales shows just how essential professional representation is.

Why Business Owners Consider Self-Sale

There are understandable reasons why owners think self-selling makes sense. Familiarity with the business, relationships with potential buyers, and a desire to save on fees all play into this mindset. However, even though good outcomes occasionally happen, the risks of a poorly managed sale can lead to devastating results. Without the expertise required to negotiate terms, evaluate buyer suitability, and maintain confidentiality, even well-intentioned sales can fall apart quickly.

Potential Pitfalls

Navigating Complex Variables

Selling a business demands a deep understanding of numerous variables, including knowing market conditions, the terms that will resonate with buyers, and negotiation strategies that can make or break a deal. Owners need to consider timing, structure, pricing, and the potential for holdbacks to ensure a high probability of success. Further complicating the sale is the need for speed and confidentiality. Owners want to secure a quick and smooth transaction that won’t disrupt business operations.

Specialization and Delegation

Just as I delegate my own tax work to accountants and rely on legal specialists for contractual matters, business owners need to delegate the sale of their companies to experts who specialize in mergers and acquisitions. A sale should be handled by those who negotiate deals daily and have a comprehensive understanding of market trends, buyer behavior, and financial nuances.

Selling a business requires specific skills that most owners can’t possess. We regularly advise clients that it’s impossible to excel at everything, which is why specialized professionals are crucial. Their experience allows them to guide owners through unknown challenges that can be catastrophic if not properly addressed.

Unknown Unknowns

Many risks in a business sale are not just knowable but entirely unfamiliar to owners. A seller unfamiliar with contract law might not realize how a holdback clause or transitionary period of employment can influence the deal. Without expertise in these areas, self-sellers can be blindsided by contractual obligations they never saw coming, from client retention terms to employee compensation clauses. The intricacies of such details require familiarity that only comes from handling these transactions daily.

Process and Representation

Formal Process and Reputation

A formal process guided by professionals is necessary to achieve the best results. Rushing into a sale to friends or someone who checked in before, without fully exploring other potential buyers, may lead to missed opportunities and unfavorable terms. A formal process maintains confidentiality while ensuring the company’s value is maximized.

The Niche Representation Gap

Our firm specializes in representing mid-sized companies in the $1,00,000 to $10 million EBITDA range, a critical market gap that often goes underrepresented in financial services. In my time working in investment banking, private equity, and corporate development, I recognized a “donut hole” in representation. Smaller businesses had brokers, and larger companies had investment banks. Still, a vast number of mid-sized firms needed representation for selling their business or seeking capital.

Conclusion

Selling your business yourself is a decision rife with risk. Whether you hire my firm or not, I implore you to consider the variables we’ve highlighted here and weigh the risks versus the rewards. The chances of reaching a successful outcome are vastly improved with expert guidance, so be sure to proceed carefully. Keep pushing forward, and remember: your best interests are served when guided by those with the right expertise.