These days , there seem to be online auctions for everything from antiques, jewelry, cars, real estate, and everything in between. So, can you sell your business by putting it up on an online auction? Anything is possible. Is it a good idea? Most likely not. You see businesses listed for sale on eBay or other industry-specific sites, and some of them get legitimate offers. However, most of these are liquidation sales of assets of a company that is going out of business. Selling a running, profitable business through a broad online auction is a bit more challenging due to the following considerations:
Packaging the company to attract interest while maintaining confidentiality can be a challenge.
It’s critical to maintain confidentiality during the sales process. If word spreads that the company is going to be sold, the news can affect your ability to retain staff, reassure customers about quality and continuity, and even your ability to compete for new business. Knowing which and how much information to make public takes skill and experience. Too little information won’t give buyers enough to decide to pursue the opportunity. Too much information may reveal your company’s identity to both employees and competitors.
Online listings only attract the buyers who happen to see them.
Most do-it-yourself listings rely on being found by the right kind of buyer; a “build it and they will come” approach. But most of the strategic buyers who will be qualified and interested are busy running their own companies. For the most part, they aren’t idly browsing the internet looking for new companies to buy. To attract the right buyer, your listing will need to get in front of people who have expressed interest in the industry, have specific goals for acquisition (such as vertical integration or expanding their market or product offerings.) Selling your company is in part, a game of numbers; you’ll need to get in front of as many buyers as possible who might be a good fit.
Vetting buyers and managing the diligence process will take hundreds of hours of your time.
Researching the financial viability of multiple buyers, managing the diligence process, and responding to inquiries over several months can become a full-time job. Even with the help of your team (your accountant and attorney), you’ll need to invest many, many hours after office hours if you want to keep the negotiations confidential. The time and resources you invest in the selling process take away from the time you spend running your business, which can have a negative impact on its value. The best and highest use of your time is making sure your business is running efficiently and remaining profitable. Besides, due diligence for a brick-and-mortar business requires some in-person interaction. Buyers would need to be geographically compatible with the business being sold, which will limit the reach of an online platform for any business that is not operated remotely.
The only way to know if you’re getting full value for your business is by comparing multiple serious offers.
The sales process can be exhausting for business owners, and they sometimes wind up taking the first legitimate offer they receive. They also sometimes refuse good offers based on their own ideas about the company’s value (or the advice they’ve received from outsiders.) You’ll need to consider both the price and the terms to determine which is the best offer to meet your financial and personal goals. If you’re selling a business for the first time, you may not have the experience or in-depth knowledge to know how to negotiate the best deal and avoid costly pitfalls. Even experienced Buyers will often come to the table with an army of advisors, so a first-time Seller trying to navigate the process on their own is setting themselves up to be at a disadvantage.
For all these reasons, we always recommend that sellers consider working with an experienced business intermediary. Their job is to make sure the listing gets in front of the right buyers, qualify them, keep the deal moving, and present the best offers. They’ll also help you understand the terms and implications of each offer so you can determine which is the right one for you. Our typical process is designed to run like a ”limited auction process” where only pre-screened Buyers with the right motivation and capabilities get access to the confidential information. You get all the benefits of an auction, but with a partner to manage the process so you can keep your focus on running your business!
