Is My Business Too Small To Sell?

The Bigger Picture In Selling Your Business

In short, no, any business of any size can sell, but becomes a hard task the smaller you are.

We receive calls from a wide variety of businesses both in terms of size and sector, all of whom need help, in one way or another, whether that be finding the right sale advisor or planning out an exit strategy. The larger the business the more options they have, but where does that leave the small or micro business owner whose turnover is less than £200k?

Firstly it is important to note that your business is saleable, every business is saleable, but only if you find the right buyer. Unfortunately buyers are harder to find when it comes to businesses that require a certain lifestyle, within sectors that have plateaued, or needing a specific set of professional skills to manage. This can be the case for small businesses, especially businesses on the high street such as cafes, restaurants, and pubs who have had a particularly hard time recently with declining footfall and higher rent. All is not lost, though, there is still a demand for small businesses across all sectors, some more than others. For example, businesses in booming sectors such as technology have a lot of potential and so will generate more interest.

When selling your business you have a multitude of options in front of you, however for a small business some are not financially appropriate or achievable. So here are the options, and advice we have for smaller enterprises.

Transfer Agent

Transfer agents are a type of sale advisor who are often described as the ‘estate agents’ for business sellers. They charge very little upfront (often between £100 and £300) and take a percentage of your sale fee upon completion. The low price point makes them a viable option for small businesses who don’t have the cash to pay for a traditional ‘broker’.

A transfer agent will market your business on various listing websites such as Dalton’s Weekly, BizDaq, and Businesses For Sale. They will also explore other marketing channels one of which being email marketing, which will consist of sending an anonymised email shot at thousands of registered business buyers. So you’re not getting the full and comprehensive broker service, rather a ‘lite’ version.

However some certainly put more effort in than others, and it is worth looking carefully at the contract you sign with them, in particular looking at the term of your agreement both for representation and fees due. Choose unwisely, and it can set back your sale by years, or you can receive unwelcome and unexpected invoices in the post.

Self-Sell

For many small businesses the buyer will, more often than not, be local, that may be a local competitor, an entrepreneur, or someone who just wants a change in career. The process of self selling could consist of marketing in local publications and by word of mouth, this certainly cuts down costs by not hiring a formal sale advisor, however there are a few things that you should be aware of before taking this on.

  1. Selling your business yourself is incredibly time consuming and stressful. Business owners are already time poor, and so adding on approximately 300 hours over a six month period might not sound particularly appealing
  2. Then there is the emotional aspect. For many owners their business is incredibly precious to them, often growing it from nothing into a life supporting business over many years, and so selling that can be an emotional and stressful journey
  3. You also need to present the opportunity properly and often owners will either spend too much time focusing on concerns, past performance or exaggerating future potential (which they have never realised)
  4. Negotiation also can be more difficult on your own. Too many business owners are not really aware of what their business is worth and therefore are incapable of reaching the right kind of agreement
  5. Finally you will need some legal assistance getting across the line, agreeing and drawing up heads of terms and managing the change in ownership

Commercial Estate Agent

If you have property within your business that significantly outweighs the value of the company goodwill, then a commercial estate agent will be one of the best routes to go down for the sale process. If the company can also be sold at the same time, then all the better, but it can still become a separate trade sale if portable. However for a mainly property transaction, having a specialist on your side will be invaluable.

So to sum up, your business is never too small to sell as every business is saleable, if you can find a buyer with the right fit. It just gets harder to find that right buyer the smaller your business is, however there are certain things you can do to increase your chances of sale as listed above.

As the only independent voice within the business sale market. We are here to help business owners with their exit strategy and make the right choices through the right advice and information. If you want more help, advice and services to do with exit strategy then call us on 0333 050 8225.

Contact the Firmgains Team

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