Broker or Direct Buyer? Two Ways to Sell Your Business

Once you decide to sell, one of the first choices is how to find a buyer. Most owners of established service companies take one of two paths: hire a business broker or M&A advisor to market the company, or talk directly with buyers. Both can work well. The right choice depends on your goals, your timeline, and how much privacy you want.

How selling through a broker works

A broker or M&A advisor helps value your business, prepares marketing materials, finds and screens potential buyers, and manages negotiations. Brokers usually work on a success fee, a percentage of the sale price paid at closing, and some also charge an upfront or monthly fee.

Advantages

• Reaches a wide pool of buyers, which can create competition
• An experienced advisor handles much of the process for you
• Helpful if you have no idea who the buyers in your industry are

Things to weigh

• Fees reduce what you take home
• Marketing a business always carries some risk that employees, customers, or competitors find out
• The process can take many months, and there's no guarantee of a sale
• The buyer who wins may not share your priorities for your team or company name

How selling directly works

Selling directly means talking with one or a few buyers you've identified, often companies that acquire businesses in your industry. You may hear from them through a referral, an introduction from your CPA or attorney, or because you reached out yourself.

Advantages

• More privacy, since your business isn't publicly marketed
• No broker fee
• You choose who you talk to and can focus on buyers who match your goals
• Often a faster, simpler process when the buyer is experienced

Things to weigh

• Fewer buyers at the table means less competitive pressure on price
• You need to evaluate offers carefully, ideally with your own CPA and attorney
• You're responsible for checking whether the buyer can close and will treat your people well

Types of buyers you may meet

Whichever path you choose, buyers tend to fall into a few groups:

• Individual buyers looking to buy and run one business themselves, often with bank or SBA financing
• Strategic buyers, usually competitors or related companies that want to combine operations
• Private equity firms, which often plan to grow a company and sell it again within several years
• Long-term holding companies, which buy businesses to own indefinitely and usually keep the company's name, team, and culture in place

Each brings different priorities. A competitor may consolidate locations. A fund may plan its exit from the start. A long-term owner may move more slowly but keep things stable for your employees and customers.

Questions to ask any buyer

• How will you pay for the business, and how certain is your financing?
• What happens to my employees and my company name?
• How long do you plan to own the business?
• What role would you want me to play after closing, and for how long?
• Can I speak with owners who have sold to you before?

Choosing your path

Some owners do both. They talk with a few direct buyers first, then hire a broker if none is the right fit. Others start with a broker and take a direct buyer's offer to compare. There's no wrong answer, as long as you understand the trade-offs and choose a buyer who fits what matters to you.

Legacy Lion Reserve buys businesses directly and owns them for the long term. If you'd like to understand how that might work for your company, we're happy to talk, with no obligation.

This article is for general education and is not financial, legal, or tax advice.