Business Broker vs DIY Sale: Which Is Better?

When selling your business, the key decision is whether to hire a business broker or go the DIY route. Both options have pros and cons, and your choice depends on factors like your time, expertise, and business complexity.

• Business Broker: Handles valuation, marketing, buyer screening, negotiations, and paperwork. They charge a commission (5%-12%), but their expertise often leads to a higher sale price and smoother transactions.
• DIY Sale: Saves on broker fees and gives you full control, but requires significant time, effort, and knowledge. Mistakes can be costly, and the process may take longer.

Quick Overview:

• Brokers are ideal for larger, complex businesses or if you lack sales experience.
• DIY works better for smaller, simple businesses or if you already have a buyer.

Quick Comparison:

If your priority is maximizing your sale price and reducing stress, a broker may be worth the cost. If saving money and maintaining control are more important, DIY could be the way to go. Choose the option that aligns with your goals and resources.

I used a business broker to sell my business - was it worth it?

What Business Brokers Do

Business brokers act as the bridge between business owners and potential buyers, guiding the entire sale process from valuation to closing. Think of them as the business world’s version of real estate agents, but instead of homes, they specialize in selling businesses. Let’s break down the key services they provide and how they can make your sale smoother.

Services Business Brokers Provide

A business broker’s job goes far beyond just connecting buyers and sellers. They manage multiple aspects of the sale, including valuation, marketing, negotiation, and paperwork.

One of their primary responsibilities is determining the value of your business. Using a Broker Opinion of Value (BOV) report, they analyze your company’s details to set a competitive price. This ensures your business is neither undervalued nor overpriced.

Marketing is another critical service. Brokers promote your business strategically to attract serious, pre-screened buyers while maintaining confidentiality. They also handle the time-consuming task of qualifying these buyers - reviewing their financials to ensure they’re capable of completing the purchase and even coordinating with SBA lenders to simplify financing.

When it’s time to negotiate, brokers step in to represent your interests. They handle offers, facilitate due diligence, and coordinate with lawyers, accountants, and lenders to keep the process moving. Their expertise ensures nothing falls through the cracks during these crucial stages.

Business Broker Fees and Costs

Understanding broker fees is an important part of the process. For smaller businesses (those generating less than $2 million in revenue), brokers usually charge a fee ranging from 5% to 10% of the sale price ^[5]. Some may use the Lehman Formula, which adjusts the commission based on the sale amount ^[5].

The good news? These fees are typically paid at closing, meaning there are no upfront costs. However, it’s vital to carefully review your broker agreement. Pay close attention to fee structures, payment terms, and any clauses related to termination, and don’t hesitate to negotiate terms that align with your budget.

Benefits of Using a Business Broker

Partnering with a business broker offers several clear advantages. For instance, businesses that use a third-party valuation during the sale process are 80% more likely to achieve a higher sale price compared to a mere 17% for those that skip this step ^[7].

Brokers also connect you with a network of qualified buyers and use advanced marketing techniques to showcase your business. They prepare essential documents like executive summaries, confidential information memorandums, and transition plans to make your business as appealing as possible.

Negotiation is another area where brokers shine. Experienced negotiators are 12.5 times more likely to feel highly satisfied with the outcome of a deal and 3 times more likely to meet their pricing goals ^[9]. Brokers help maintain positive discussions with buyers while advocating for your best interests.

Finally, brokers save you time and reduce stress by managing the nitty-gritty details of the transaction. They coordinate with accountants and attorneys, identify potential roadblocks, and help structure deals with favorable terms - whether it’s payment schedules, contingencies, or other critical factors ^[6][8]. By streamlining the process, they make selling your business a much more manageable experience.

Selling Your Business Yourself

Taking the DIY route to sell your business can save you money on broker fees and give you complete control over the process. However, it also demands a significant amount of time, effort, and know-how. While this method has its perks, it comes with its own set of challenges compared to working with a professional broker.

Steps for a DIY Business Sale

Selling your business independently means you’ll need to manage every stage of the process, which requires careful planning and execution. On average, you’ll need 18 to 24 months of preparation before putting your business on the market ^[11].

• Get a Business Valuation Estimate
  A professional valuation typically costs $5,000 or more ^[10] but if you want to get a quick and reliable range, you can simply get an estimate from Venturu's Free Business Valuation Estimate tool, backed by hundredths of thousands of data points. Without this, you risk either undervaluing your business or scaring off buyers with an inflated price.
• Prepare Your Financials
  Your financial documents need to be accurate and complete. Crystal Stranger, CEO of Optic Tax, warns:

  I have seen hundreds of thousands held back from a sale deal because of [tax issues like] a missed state tax return or sales tax issues. Often, these issues could have been resolved for just a few thousand dollars prior to the sale, but end up costing hundreds of thousands if discovered in due diligence. ^[11]

• Create a Confidential Information Memorandum (CIM) and NDA
  A CIM provides vetted buyers with detailed information about your business and can cost between $500 and $5,000 to create ^[10]. You’ll also need a lawyer to draft a Non-Disclosure Agreement (NDA) to protect sensitive details before sharing them with potential buyers ^[10].
• Market Your Business and Secure Intent
  List your business on reputable business-for-sale websites and use your personal network to connect with buyers ^[10]. Before moving into due diligence, ensure you have a signed Letter of Intent (LOI). Avoid letting buyers dive into due diligence without first submitting an offer ^[10].
• Handle Due Diligence and Negotiations
  Be prepared to respond quickly to due diligence requests and negotiate the terms of the Definitive Agreement. This stage requires your full attention and focus ^[10].

Unlike working with a broker, where you benefit from their expertise and connections, selling your business on your own means relying entirely on your own resources.

Advantages of Selling Without a Broker

Despite its challenges, a DIY business sale has some clear benefits, particularly when it comes to finances and control.

One of the biggest draws is avoiding broker fees. With the median sales price on BizBuySell exceeding $300,000, broker commissions can easily top $30,000 ^[15]. Many business owners choose to handle the sale themselves to keep that money in their pocket.

You also gain complete control over the process. Direct communication with buyers allows you to understand their intentions better and even build personal relationships ^[16]. Additionally, you won’t have to worry about a broker who might not fully represent your interests, and you can set your own timeline without external pressures ^[15].

Problems with DIY Sales

While the DIY approach offers savings and control, it comes with its own set of hurdles that can make the process more difficult than anticipated:

• Time Demands
  Sales professionals only spend 28% of their time actively selling, with the rest devoted to tasks like administration and research ^[14]. For business owners managing daily operations, this added workload can be overwhelming.
• Limited Marketing Reach
  Although 72% of social sellers hit their sales targets using social media, many business owners don’t have the same marketing skills or networks that brokers bring to the table. In fact, 79% of marketing leads never convert into sales ^[13], making it tough to find qualified buyers on your own.
• Pricing Errors
  Without access to market data or comparable sales, you could set the wrong price - either undervaluing your business or scaring off buyers with unrealistic expectations ^[12].
• Emotional Decisions
  Selling a business you’ve built can cloud your judgment. Over half of small business sales fail because buyers uncover undisclosed issues, often tied to an owner’s emotional attachment ^[2].
• Financing and Competitor Risks
  If you choose to offer seller financing, you’ll need to assess the risk of buyer default and whether you’re ready to remain involved in the business. Additionally, sharing sensitive information with potential buyers while protecting trade secrets can be tricky, especially if competitors show interest ^[12].
• Knowledge Gaps
  Handling legal documents, responding to due diligence requests, and negotiating deals without full-time expertise can be daunting. Even with help from lawyers and CPAs, the process can quickly become overwhelming ^[12].

Business Broker vs DIY: Direct Comparison

When it comes to selling your business, the choice between hiring a business broker or handling the sale yourself (DIY) involves weighing several factors. Here's a detailed comparison to help you understand the trade-offs and make an informed decision.

Side-by-Side Comparison Chart

The following table highlights key differences between broker-led and DIY sales, focusing on factors that influence both the outcome and the overall experience.

This breakdown shows how brokers can streamline the process, reduce stress, and often secure a higher sale price, while DIY sales offer more control but come with greater responsibilities and risks.

For instance, imagine selling a business valued at $550,000. A DIY sale might result in around $480,000 after accounting for $70,000 in expenses. On the other hand, a broker-led sale could fetch $600,000. After deducting a 10% broker fee ($60,000) and $10,000 in legal fees, you'd net $530,000 - $50,000 more than the DIY approach ^[18].

Beyond the Numbers

The financial aspect is only part of the equation. DIY sales demand significant time - 15-20+ hours per week - often pulling you away from running your business ^[3]. This can hurt your business's performance during the sale process, potentially lowering its value. Brokers, however, handle these time-consuming tasks, from finding buyers to managing negotiations, allowing you to focus on maintaining your business.

Jacob Orosz from Morgan & Westfield highlights another critical point about the risks of DIY sales:

Claims regarding success rates are suspect at best. It's more likely an unsubstantiated claim and that no attempt was ever made to actually measure the data. In more blunt terms, it's a lie - unless they can provide answers to the questions above and back their claim with actual data. Would you hire someone whom you can't trust to sell your most valuable asset? ^[20]

The due diligence phase is particularly challenging for DIY sellers. Without professional guidance, navigating buyer requests and managing documentation can increase the risk of deal failure. Brokers, with their expertise, help prevent these pitfalls and ensure smoother transactions.

The Bottom Line

Choosing between a broker and a DIY sale boils down to your priorities. A broker's fee might seem steep, but the potential for a higher sale price, reduced stress, and time saved can make it worthwhile. On the other hand, if you prefer full control and are comfortable handling the complexities, a DIY sale might be the right path. Carefully consider your situation, timeline, and comfort level to decide which approach aligns best with your goals.

How to Choose the Right Option

Deciding whether to hire a business broker or handle the sale of your business yourself depends on your unique circumstances. There’s no universal answer - your choice should be guided by a careful evaluation of key factors that align with your goals and situation.

Review Your Business and Goals

Consider Your Business's Size and Complexity

The scale and intricacy of your business play a major role in this decision. Larger or more complex businesses often benefit from a broker’s professional expertise. On the other hand, if your business generates less than $500,000 in annual revenue, selling it yourself could save you money, as broker fees might eat into your proceeds. For businesses with higher revenues, the advantages of professional representation typically outweigh the costs ^[23].

Be Honest About Your Time Commitment

Selling a business on your own can be time-consuming and may interfere with daily operations, potentially affecting its value ^[1].

Assess Your Skills and Confidence

If you're not confident in areas like valuation, marketing, or negotiation, a broker’s expertise can be indispensable ^[1].

Think About Confidentiality

If keeping the sale under wraps is important - whether to avoid alarming employees, customers, or competitors - a broker can help protect sensitive information throughout the process ^[21].

These considerations will help you determine whether to go it alone or seek professional assistance.

When to Hire a Business Broker

Certain scenarios make hiring a broker the smarter choice.

Complex or High-Value Transactions

If your business involves intricate transactions, holds substantial financial value, or requires strict confidentiality, a broker can provide the expertise and discretion you need. Businesses sold through brokers often sell faster and at higher prices compared to those sold independently ^[22].

Lack of Sales Experience

If you’re unfamiliar with the process of selling a business, a broker’s knowledge in valuation, marketing, and negotiation can be a critical asset ^[22].

Time Constraints

Running a business while managing its sale can be overwhelming. A broker can take over time-intensive tasks like marketing, vetting buyers, and negotiating, allowing you to focus on operations.

Maximizing Your Sale Price

Brokers bring value by ensuring accurate valuations, maintaining confidentiality, and negotiating effectively. Their involvement often offsets their commission by achieving a higher sale price and streamlining the transaction ^[1].

When DIY Makes Sense

In some cases, selling your business yourself may be the better option.

Smaller or Simpler Businesses

If your business is straightforward and you already have motivated buyers - such as family members, employees, or trusted contacts - a DIY sale could be a practical choice ^[1] [2].

Strong Personal Connections

Tapping into your existing network of industry contacts or potential buyers can make a DIY sale easier and more effective than casting a wide net.

Desire for Full Control

Some business owners prefer to handle every detail of the sale themselves. This approach gives you complete control over the process and eliminates broker commissions ^[1].

Budget Constraints

For businesses valued under $500,000, the cost of broker commissions can significantly impact your net proceeds. In these cases, managing the sale yourself might make more financial sense. However, it’s worth noting that over half of small business sales fail due to unforeseen issues - problems a skilled broker would typically address ^[2].

Understand the Risks

It’s important to acknowledge that about 75% of businesses listed for sale never actually sell ^[22]. This sobering statistic underscores the challenges of the process, whether you hire a broker or not.

Ultimately, your decision should be based on a thoughtful analysis of your business’s size, your available time, your expertise, and your need for confidentiality. These factors will guide you toward the option that best fits your situation.

Conclusion: Pick the Best Approach for Your Sale

Deciding whether to hire a business broker or sell your business on your own depends on what fits your specific situation best. Each option has its own set of benefits and challenges, so it’s important to weigh them carefully.

Business brokers bring professional expertise, access to a larger pool of buyers, and strong negotiation skills. These advantages can often lead to higher sale prices and a smoother process. However, their services come at a cost, as you’ll need to pay a commission.

Selling on your own gives you complete control over the process and helps you avoid broker fees. But it also demands significant time and effort, and mistakes can be costly if you’re unfamiliar with the process.

The size and complexity of your business play a big role in this decision. Larger businesses with intricate operations often benefit from professional help, while smaller, simpler businesses might be easier to handle on your own. Be honest about the time you can dedicate - managing a sale while still running your business can be overwhelming and might even impact its value ^[1].

To get started, consider using free business valuation tools or browsing reliable broker directories to explore your options. Whether you decide to work with a professional or take the DIY route, thorough preparation and transparency are critical for a successful sale.

Take a close look at your business, your skills, and your timeline. Choose the path that sets you up for success and helps you achieve the sale price you’re aiming for.