The question is whether you'd end up with more in your pocket once you count the price you achieve, the time it takes, and what happens if the sale goes sideways. Here's how the two compare, including when you probably don't need us.
When a private sale makes sense
A private sale often works when:
- You already know the buyer. A long-serving manager, a family member or a business partner who has been asking for years.
- The buyer approached you. A competitor or supplier who wants your business specifically.
- The business is small and simple. A sole-trader round or a home-based business where the value is mostly in the gear.
Even then, you'll still need a lawyer for the agreement and an accountant for the tax. Many owners in this position get an appraisal anyway, so they know the price they're agreeing to is fair.
What you take on in a private sale
When you sell privately, you're the broker. That means you:
- Work out the price and justify it to buyers
- Write the listing and information memorandum
- Advertise without revealing the business
- Field enquiries, including the time-wasters and curious competitors
- Check buyers' funding and get confidentiality agreements signed
- Negotiate price, conditions, stock and handover
- Chase finance approval, due diligence questions and landlord consent
All while running the business, which needs to keep trading well because the buyer is watching.
What a broker does differently
Reach. A broker brings buyers you wouldn't find on your own, including people already registered and searching for a business like yours.
Screening. Buyers are checked for funding and intent before they reach you. Competitors fishing for information are filtered out.
Confidentiality. Your business stays anonymous until a buyer has signed a confidentiality agreement and proven they're serious. That's hard to manage from your own phone number.
Negotiation. A broker sits between you and the buyer. Owners are often too close to the business to negotiate well, and the buyer knows it.
Keeping the deal alive. Most sales hit a snag during conditions. Someone whose job is getting deals to settlement handles those snags as a matter of course.
Regulation. Brokers are licensed under the Real Estate Agents Act 2008 and bound by its Code of Conduct, including rules on appraisals, client care and holding deposits in a trust account. You can check any broker's licence on the Real Estate Authority's public register.
The break-even maths
For illustration, say a broker's fee works out at $30,000 on a $400,000 sale.
To come out ahead privately, you'd need to achieve at least $370,000 on your own, at a similar speed, with no deal collapsing along the way and without your time and trading suffering.
So the real question is whether a broker gets you $30,000 or more in combined value from:
- A higher price, through wider buyer reach and stronger negotiation
- A faster sale, so you're not carrying the business longer than planned
- Fewer collapsed deals, where weeks are lost to a buyer who couldn't get finance
- Protected trading, because you're running the business instead of selling it
If you already have a committed buyer at a fair price, the maths often favours selling privately. If you're going to the open market, it usually doesn't. Every business is different, though, and a straight conversation about yours costs nothing.
Questions to ask any broker
- Are you licensed? Check the name on the Real Estate Authority's public register.
- How is your fee calculated, and is there a minimum?
- How will you market my business without identifying it?
- What comparable sales support your appraisal?
- How long is the agency agreement, and how can it be ended?
- Who will I deal with day to day?
A good broker answers all of these plainly and in writing. Our fees and commission are set out up front.
Not sure which way to go?
Start with a free, confidential business appraisal. It tells you what the business should sell for, which is the number you need whether you sell privately or with us. There's no obligation to list.
If you do decide to sell yourself, the steps in how to sell a business in NZ still apply.