As a business broker, I have encountered countless businesses who have wanted to sell, yet their revenue and earnings were far too low to justify the expense of a business broker. A business broker isn’t cheap, but often necessary to navigate the complexities of a business transaction.
What does this mean for small businesses that still want to sell? After all, these owner-operated businesses are the most common type of small business. They still experience retirement, moving, divorce, burnout, etc., and need to sell. Surely there must be a better exit strategy than just shutting the doors, right?
Fortunately, there ARE a few ways a micro-business can still sell without a broker. I suggest the following five ways to find a buyer:
1) Selling Your Business on Craigslist
Craigslist listings are free and they DO get a lot of eyeballs. In the business/commercial section, I primarily see business equipment being sold (e.g. restaurant/bar equipment, food truck vans, etc.) but there are also still a lot of complete businesses being sold. The biggest thing to be cautious of are that buyers on Craigslist are typically tire kickers. I strongly suggest not getting your hopes up with every inquiry. You may also want to have a basic NDA form for each prospective buyer to sign so that they don’t curiously peek at your financials without any intention to buy.
To make your listing, go to: Create a Posting > For Sale by Owner > Business/Commercial
2) Selling Your Business in Facebook Groups
The business owner community is highly active on Facebook. Make sure to join business owner and entrepreneur groups that are local in your city. Caution – a lot of these groups have little substance and often end up being a forum for other owners to pitch their services, but this audience is probably a little more targeted than other affinity groups. Best of all, this option is free. Remember to paint the opportunity in a positive light and highlight the best qualities of the business. Some things you can highlight are how many total and repeat customers you have, how long you’ve been in business, your marketing (non-existent marketing is interesting to buyers), key employees staying with a transition, or ways how a buyer can grow the business to the next level. Don’t give away too much information. Give away just enough to generate enough interest to secure the next conversation.
3) Selling Your Business to an Employee
Employees could be the perfect buyers of your business. They are highly familiar with the product, operations, and customers. It is likely they wouldn’t need extensive training should they take over, which overcomes a big barrier for a potential buyer that is unfamiliar with the type of business. Having said that, an employee-buyer normally doesn’t work out due to lack of funds. Many exiting business owners prefer cash or a quick exit (i.e. no owner-financing). At the same time, the business may not qualify for an SBA loan due to its small size. This means the buyer needs to be well funded with plenty of liquid cash to take over, which unfortunately isn’t always the case with employees. However, you never know! An employee may be able to tap family members or alternative sources of funds. Be careful though. You should be strategic on which employees you offer the business to. Employees can often get spooked by the sale of a business, and the last thing you want is employee turnover right before a new owner takes over (it will scare away new owners).
4) Selling Your Business to a Customer
If you’ve been in business a while, you likely have some die-hard customers that love doing business with you. Many of them deeply care about the continuity of your business, and will help you find a buyer by connecting you with someone they know. In some cases, they may want to buy the business themselves. They likely have a good idea of the product/service already and have their own ideas about how to continue to grow the business and make it better. Start by sending an email to your mailing list to get a feeler. Don’t know how to write this email? I can help you with this!
5) Selling Your Business to a Competitor
Growing by acquisition can be an excellent growth strategy for a business, which is why competitors (if they have the capital and the foresight) are excellent acquirers of your business. It makes sense – they already know your market, how to do your job, and how to service your customers. By acquiring your business, they can grow their market share quickly and create synergies with their existing platform. The best way to reach out to a competitor is to be targeted on who you reach out to, and make sure you connect with the decision maker (i.e. owner) from the start. Need help coming up with this type of plan? Let’s talk.
What Comes Next?
Finding the buyer is often the hardest part. Once you do, get the business under contract using an Asset Purchase Agreement contract that spells out all the terms of the sale.
Once under contract, both buyer and seller (primarily buyer though) must ensure that all required licenses, permits, and contracts are transferred over properly. This is simply a matter of staying organized and thorough. Some things may take a while, like having the buyer obtain a new license, so stay patient. Make sure you check requirements for federal, state, county, and city jurisdictions.
Once you feel confident that things are headed towards closing, you will have to find a business closing attorney to draw up the legal paperwork. Expect for this to cost as little as a few hundred dollars to a few thousand; it all depends on the complexity of the business. This cost is typically split between the buyer and seller.
Finally, both parties sign on the dotted line, the funds transfer, and the American Dream of business ownership lives on. Let me know if there are any specific questions and hope this helps!
