Why Small Business Owners May Choose “for sale by owner” When Exiting Their Business

If you own and manage a business with a valuation under $2,000,000, and you’re seeking help from a business broker to market and sell your business, there is a strong chance that you may not get the help you need. This is because business brokers are paid a commission on the sale price. So, as more and more businesses come onto the market, it only makes sense that good brokers focus on businesses worth more than a few hundred thousand dollars. 

Whether you have been unsuccessful in finding a business broker or are more of the “do it yourself” type, taking charge of selling your business on your own is a common approach for exiting a small business

Selling a business using the “for sale by owner” FSBO method

Independent sellers (individuals who decide to sell their businesses themselves) are called “For Sale By Owner” (FSBO) sellers. FSBO sellers represent a growing number of individuals who list their establishments for sale. With the internet and other technology-based resources, today’s sellers can learn how to effectively market and sell their businesses to potential buyers.

For owners who feel they can effectively market and manage the sale of their business, an FSBO listing is ideal. ExitGuide combines technology and expert resources to help sellers prepare and manage the sale of their business. 

Why do sellers choose the FSBO method of selling a business

  • FSBO sellers can easily leverage online information and business-for-sale websites. Not only do these websites help sellers to market their business to potential buyers, but the websites also provide education and valuation resources to help them prepare and their business.
  • There is more to the process than finding a buyer. Much of this involves accessing important information such as financial statements, tax returns, and other documents related to the business. Many owners do not see a need to pay an expert to oversee this process because they have access to this information, and it is a matter of allocating the time to organize. 
  • Since they are the most familiar with their company’s strengths and limitations, some sellers believe they are the best person to represent their company. As a result, these sellers feel that they can maximize the price and minimize the time the company sits on the market.
  • FSBO sellers do not have to pay broker commission. Even though business owners do not have the time or experience and are not comfortable handling the responsibilities of selling their business, they often do it anyway to avoid paying the expense of a broker’s commission.
  • FSBO sellers remain intimately involved in the sales process. Many sellers consider it a huge advantage to stay closely involved because it keeps them in the loop. Business owners with a “hands-on” leadership style may prefer this level of involvement rather than work through a broker.  

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It is important to note that there are some risks involved with being an FSBO seller. Some risks are:

  • Ineffectively marketing the business and dealing with the selling process, in general, can be costly to the business owner. Selling a business is a specialized transaction and requires a certain level of expertise. FSBO sellers need to actively seek out all the necessary resources and diligently integrate them into their sales strategy. Throughout the transaction, it would be wise for an FSBO seller to consult with their attorney or accountant for reassurance.
  • Selling a business that an owner has spent years building can be very emotional and a difficult process. Being too attached, the owner may find it difficult to make wise decisions if negotiations become tense and stressful. A broker can create an often much-needed buffer between the buyer and seller and offer a different (objective) perspective.
  • Selling a business may interfere with running the business. The process of taking a business to market, finding qualified buyers, and managing the negotiation process can be time-consuming and can interfere with running the business.
  • Loss of revenue or customers can be the result of a lack of attention to running the business. Loss of revenue or customers is the last thing an owner wants to happen when attempting to sell their business for the maximum value.
  • Unless you already have a buyer in mind, such as a competitor, supplier, employee, or family member, finding a qualified buyer could prove to be difficult. Finding the right buyers may be challenging to say the least. You might find yourself spinning your wheels dealing with individuals who lack the ability, means, or desire to actually close the deal. You could find yourself wasting a lot of time.

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Final Thought

With today’s technology, the bottom line is that you don’t need a broker to sell your business. Instead, you can be an FSBO seller by accessing content to learn about the process and tools to manage the process. Yes, this involves far more than marketing the business, and many owners are well equipped to manage the process from start to finish if they have a road map for where to start and what to do. If you decide to be an FSBO seller, ExitGuide can help you navigate the process.