Business Broker vs Selling Privately

Key Takeaways

• A private sale can suit an owner who already has a buyer, a simple business and time to run the process.

• A broker takes on pricing, marketing, buyer screening, negotiation and deal management, and is generally paid from the sale.

• The comparison is the net result after costs, weighed against the owner's time, pricing risk and the reach of the campaign.

• A solicitor and an accountant are generally needed on either route.

• Hybrid arrangements exist, and the suitable choice depends on the business and the owner's situation.

Selling a business without a broker means the owner runs the full sale process. That covers pricing, marketing, buyer screening, negotiation and coordinating advisers through to settlement. Using a broker hands much of that work to a licensed agent who is paid from the sale.

The choice turns on the business, the likely buyer pool and how much of the process the owner can take on while still trading. A free business appraisal can give an owner a market view of price before choosing a route.

Owners who choose a broker for selling a business hand over the marketing, buyer screening and negotiation while they keep trading. Owners who sell privately take on that work themselves, alongside their accountant and solicitor.

What a Private Sale Involves

Selling privately means the owner performs every task a Gold Coast business broker would otherwise handle, while continuing to run the business. The tasks generally run in this order:

• Work out an asking price and the evidence that supports it.

• Prepare the financials, adjusted profit and a written summary of the business.

• Write and place listings, or approach likely buyers directly.

• Field enquiries, issue confidentiality agreements and qualify each buyer.

• Run inspections and answer due diligence questions.

• Negotiate price, terms, stock, training and handover.

• Coordinate the landlord, the solicitor, the accountant and the buyer's financier through to settlement.

Each step is manageable on its own. The challenge is doing all of them at once, discreetly, while the trading figures hold up for the buyer.

What a Broker Does

A broker acts for the seller under a written appointment. The core work generally includes:

• Appraising the business and recommending a price range, supported by comparable sales where available.

• Preparing the information memorandum and the financial presentation.

• Marketing the business confidentially, through listing portals and to registered buyers.

• Screening buyers for capacity and intent before information is released.

• Negotiating as an intermediary, which keeps the owner at a distance from offers and counter-offers.

• Managing conditions, timelines and the parties through due diligence to settlement.

A broker also brings process knowledge, such as how lease assignments usually run, what buyers' financiers ask for and where deals can stall. For an owner selling for the first time, that knowledge may be difficult to replace.

Comparing the Two Routes

Each route shifts work, risk and expense between the owner and the agent:

Sale Costs

A broker is generally paid a commission at settlement, sometimes with an upfront marketing or engagement fee, as set out in the appointment. Private sellers avoid the commission but still pay for advertising, their own advisers and any valuation they commission.

The useful comparison is the net outcome. A campaign that reaches more buyers, prices accurately and holds together through due diligence can return more after commission than a private sale that is underpriced or falls over. It can also return less. Do not assume either route produces the higher net return.

Owner Time

A private sale draws on the owner's time while the business still needs to perform. Buyers generally review recent trading, so a dip during the sale may affect the price.

A broker takes on much of that work. The owner's role narrows to supplying information, meeting qualified buyers and making decisions.

Reach and Confidentiality

Private sellers can reach buyers through listing portals, industry contacts and direct approaches. A broker may add a register of enquiring buyers and can market the business under a generic description without the owner's name attached.

Confidentiality can be harder to maintain in a private sale. Enquiries come straight to the owner, inspections are arranged by the owner, and there is no intermediary to separate curiosity from genuine interest.

Pricing and Negotiation

Owners can be inclined to price on what the business means to them, while buyers price on verifiable earnings and risk. An independent appraisal tested against recent sales of similar businesses can help close that gap, where that sales information is available. Earnings adjustments used to support a price can increase or reduce profit, so do not assume they will only add value.

Negotiation can also be easier at one remove. A broker can hold a firm position without straining the working relationship the owner will need with the buyer during handover.

When a Private Sale Can Work

A private sale tends to suit situations where much of the broker's work is already done or not needed:

• A buyer is already identified, such as a family member, manager, business partner or competitor who has approached you.

• The business is small and simple, with few staff, a straightforward lease and limited stock or equipment.

• The owner has sold a business before and has time to run the process again.

• The sale is a succession or management buyout, with the price agreed on an accountant's figures and no market campaign.

Even then, use a solicitor for the contract and an accountant for the tax position. A private sale is a sale without a broker, not a sale without advisers.

When a Broker May Suit

A broker may suit a sale that needs a market campaign or more coordination than the owner can give:

• No buyer has been identified and the market needs to find one.

• Staff, customers or the landlord would react to news of a sale.

• The business has adjusted earnings, a lease assignment, licences or franchise consents to manage.

• The owner cannot step away from trading to run a campaign.

• The owner wants an independent view on price before committing to a figure.

Hospitality businesses can involve several of these at once. This is particularly so where the lease and a liquor licence transfer shape what a buyer can do with the premises.

The Hybrid Option

Some owners take a middle path. They find the buyer themselves, then engage a broker or solicitor to structure the deal, manage conditions and keep the transaction moving. Others appoint a broker to source and qualify buyers while keeping negotiation in their own hands.

In Queensland, the approved appointment form allows an open listing, a sole agency or an exclusive agency, and the type chosen affects when commission may be payable. A buyer the owner introduced may be excluded from commission, or a reduced fee may apply. Either way, have that written into the appointment before it is signed. Check the term of the appointment, whether it is exclusive and what triggers the fee.

Parties Involved on Either Route

Whichever route is chosen, the same parties are generally involved:

• A solicitor for the contract, lease assignment, restraint and warranties.

• An accountant for adjusted profit, tax on the sale and how the price is split between goodwill, plant and stock, including whether small business tax concessions may apply.

• An employment adviser for staff entitlements and how they transfer or are paid out.

• The buyer's financier, whose approval can affect the settlement timetable.

A broker coordinates these parties. In a private sale, the owner does.

List the Sale Tasks

Go through the private sale tasks listed above and mark which steps you can handle while trading and which would need outside help. Take that list to your accountant and solicitor so the route you choose reflects the work involved.

Bond Business Brokers can outline what a managed sale would involve for your business before any appointment is signed.

Common Questions

Do I need a licence to sell my own business in Queensland?

Under the Property Occupations Act 2014, a licence is generally required to sell a business for another person for reward, which is why business brokers hold a real estate agent licence. An owner selling their own business is generally in a different position. The rules can apply differently if a third party is paid to help, so have your solicitor confirm what applies.

Can I switch from a private sale to a broker partway through?

Generally, yes. Before signing an appointment, list any buyers who have already enquired and agree in writing whether commission applies if one of them buys. Also check that any earlier advertising or listing arrangements have ended.

What does a broker do that my accountant cannot?

An accountant prepares the figures and advises on tax, but does not usually market the business, qualify buyers or negotiate the sale. A broker runs the campaign and the transaction. The two roles can work alongside each other.

This article provides general information only. Obtain advice from appropriately qualified advisers about your circumstances before entering into a transaction or relying on tax, legal or regulatory information.