Portia Hardaway: How do I Sell My Business without a Broker

Today's episode of the podcast, Robert Hirsch from Freedom Factory discusses "How do I Sell My Business Without a Broker".

Listen to the podcast, watch the video, or read the transcript below.

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Transcript of Podcast

As entrepreneurs, some of our best content is when we speak the unspeakable. And there are many people that give us a call here at Freedom Factory and they want us to sell their business but the problem is we can't pay for ourselves. And if we can't pay for ourselves, we don't take them on as a client.

So I wanted to create a video, which kind of shows you the things to think about and essentially how to sell your business without a broker. So the first thing you want to think about is what's your business worth? And valuation makes a lot of sense and there's some factors to it as an online business, meaning can you sell it to anybody worldwide or do you have to live in a small community in your section of Ohio in order to sell it?

Because if so, the marketing plan is really different. And so you want to maximize your potential buyer pool and you want to maximize your marketing plan to reach them. For example, if we have an international business, we'll go through 30 or 40 different channels to private equity and venture capital and entrepreneurs and angel investors, and we're trying to get as many people interested as we can to find the right buyer.

And so a big part of that is valuation, or what does it take to bring your business to market? And if we can look at market comps and we can certainly help you with it if you give us a call. But if you don't know, I would take your seller's discretionary cash flow, which is kind of EBITDA plus your add backs. And I would think about a multiple of three to five times. And I'm assuming that you're doing less than a million in earnings, and if there's nothing that's a sustainable competitive advantage and there's not a lot of history, you're going to be on the lower end of that scale.

And if you've been doing it for 20 years and you've got a huge reorder rate, you're going to be on the higher end of that scale. But if you just have to pick something and go with a guide, three to five is a pretty good starting guide to go with. And then plus assets, if there's real estate or capital expenditures, et cetera, et cetera, et cetera. So valuation is a big thing. And where do you want to come to market? And also another element to think about is how quickly do you want to sell it? Do you want to sell it in three months or do you want to sell it within a year? Because if so, your pricing strategy is going to be a little bit different.

So one of the things that we do at Freedom Factory is we do all the information before we even take it to market. So we create our prospectus and our book and our teasers and our NDAs and our contracts and our documents set before we even place the first ad.

So if somebody calls, they want information, boom, we send them the NDA. The teaser goes out, which the teaser can identify what your, business. It's just your type in a general category, construction company with revenues of 16 million wants to sell, and then once they sign the NDA or the MNDA, which is a nondisclosure, then we go into the perspective to the book and we start to go deeper and deeper.

But the key part is you do all that before you take your first lead. And then you think, okay, well I've got to put together a doc set. You don't want to not have your nondisclosure, not have LOIs, not have an asset purchase agreement or a stock purchase agreement, and you want to put all that together before you take it to market.

Now, some areas where you might want to sell without a broker, let's say it's a family sale and you're selling to your children, and perhaps you're carrying a seller's note and they're paying for your retirement. You don't necessarily need a broker for that. Although I would recommend a great lawyer that really understands the perils of family business.

Another case that is analogous to that is let's say you're selling to your employees and a lot of people sell to their employees, and the downside of selling to a family member is you're not going to maximize your value, but it's not so bad because you're selling it to your kids or to your relatives.

Now, if you're selling it to your employees, you're going to have the same downside. You're not going to maximize the sales price of your business, and usually people do that if the business has several risk factors that makes it very difficult to go sell. And so when you're doing that, I would still recommend engaging a broker, running an external process, and creating a competitive thing, especially on the employee side, creating a competitive market situation so they're at least paying you fair market value for your business.

Now, you know, the final piece is what's your marketing plan. Are you going to advertise this in the Wall Street Journal in the New York times or are you going to go out to private equity groups or are you just going to advertise it in your local paper? Because that's really going to determine how many people are going to be interested and what type of process that you're going for. Here at Freedom Factory, we run the top brokerage in the country and we've created a product for our customers where we're not going to sell for them where we can't pay for ourselves and it gives you 90% of the value. It gives you all your docs, your marketing plan, the same templates that we use. It gives you 90% of the value at less than 10% of the cost.

And so if you want to talk about that or go to market strategy or discuss any of the things that we've talked about in depth, just find our phone number below or drop us an email at Freedom Factory and we look forward to helping you soon. Thanks for spending your valuable time with us.

Thank you so much for watching. Please hit like and subscribe.

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Freedom Factory
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Greenwood Village, CO 80111
Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
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