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.
Contact Freedom Factory
Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230
Greenwood Village, CO 80111
Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
https://g.page/freedom-factory-denver
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