Want to Sell Your Business Privately? Think Again…
Make Institutional and High Networth Buyers COMPETE to Buy Your Business
Deciding to sell your business privately means blindly accepting whatever the other party offers and leaving money on the table.
Without a frame of reference for what constitutes a realistic expectation for your business, both parties are left having to rely on each other’s goodwill. Sure, successful acquisitions can happen through private deals — and they do happen (often in the buyer’s favor) — but for those looking to make the right acquisition to achieve their business goals, deal flow is everything.
If you’ve ever sold online properties through private deals or manual outreach campaigns, there is a pretty good chance that the business was sub six figures. When scaling a six-figure or higher business and looking for the best possible price, private deals alone won’t cut it. If you’ve been in the online business game for a while and are wondering why you should choose a broker to sell your business instead of handling a private acquisition, read on.
Why Use a Broker if You Already Have a HUGE Buyer Lined up?
People ask us all the time why anyone would choose a broker over making a private deal, and there are plenty of reasons why you would. A huge red flag for any seller looking to protect their investment and the hard work they’ve put into it is withholding your asset. In addition to protecting the business by not disclosing this information, you’re giving the buyer a more attractive opportunity that not everyone knows about.
Often, you hear complaints about paying a broker’s commission fee based on the size of the business and even a listing fee (something we recently removed) to have them list the business in their marketplace. Yes, brokers charge a fee that will often decrease as the price for the business goes up, but you are missing the reason why brokers do this to begin with if the fee is your primary concern.
Let’s be honest. Institutional buyers that have raised capital to acquire businesses are often working with millions of dollars and concluding multiple deals per year. They follow strict buying criteria, but if your business offers something they see value in, they’ll back it up with a solid offer. We’ve even had large institutional buyers acquire a business from our marketplace the day the listing has gone live.
So, why would anyone use a broker if they already have one of these institutional buyers in their back pocket ready to make a deal? The short answer: competition.
The Nature of Institutional Buyers
Sure, it sounds nice to get that two- or three-million-dollar exit from your FBA or SaaS business using one of these buyers — and it is — but you’re missing out on the chance to make more.
Institutional buyers need a huge amount of deal flow because they’ve raised money from private investors and need to put that money to use to show a return on that capital. This is because they tend to be on a tight deadline; otherwise, they’ll lose the money they worked so hard to raise.
Many buyers will work hard at producing a steady source of private deal flow. In fact, some great opportunities will come across their table. But these private deals won’t always be enough to deploy all the capital they’ve raised through private equity and family office firms. This is why almost 100% of all institutional buyers will still use brokers as a supplement to their private deal flow. In some cases, and for many of the institutional buyers we know, using a brokerage marketplace often becomes their main source of deal flow when private deals are thin.
So, what does this mean for you as a seller looking to exit your business?
Using a broker, rather than conducting a private deal, means that instead of pitching your business to ONE institutional buyer, you get to pitch it to ALL of them. Knowing that your business will have thousands of interested buyers makes cornering the market easy with the help of a broker.
Cornering the Market by Using a Broker
When you choose a broker acquisition over a private deal, you can position your business in the most attractive form possible. This means that every single high-net-worth buyer will be out there looking at your business and performing due diligence on your asset. For this reason, it is important that you present your deal in a very professional manner and have all your details in order.
When you use a broker to market your business to an audience beyond those you can reach on your own, you set up a framework to have buyers competing for your asset. Once this competition begins, you can work out the details in your favor, since one buyer or another will end up meeting your terms. This is a huge advantage over a private deal, where you will often have buyers who don’t respond, don’t take notice, or make a ridiculous counteroffer that isn’t worth your time. And this isn’t going to trigger much competition for your business.
Will They Actually Compete?
Having done plenty of business online with both buyers and sellers, we can say that the competition for an attractive digital property is fierce. On one side, you have a buyer looking to acquire something with room to grow that offers great ROI potential; on the other side, you have a seller who wants the best possible exit from the years of work they put into the business.
It’s safe to say that once you have a positive experience with a broker, you’ll likely go back to them for another business acquisition. In fact, we know several institutional buyers who have raised millions of dollars and like how familiar they are with all the brokers and other buyers who will also be competing for your business. One such buyer came to us and said, “Let me know if [buyer] makes an offer, and we’ll beat it.”
We know first-hand how fierce the competition can be when you’re scouring the internet for amazing deals that align with the goals of most institutional buyers. Knowing how heated the competition for an attractive online property can be, why would you choose to only look at private exits?
If you want to sell your business for the most money possible and get the highest valuation, why not get the competition going? You could have hundreds, if not thousands, of these same types of buyers competing for your business immediately instead of wasting time trying to find them. When you choose to sell your business on the largest curated marketplace for online business buyers and sellers, you’re opening doors you would have no access to if you were to go the private deal route. Once you have a better understanding of what other similar assets are being sold for, you will gain the upper hand by utilizing a broker to present the strengths of your business and highlight growth opportunities for not one but thousands of institutional buyers all at once.
