Advice for Selling Your Business Through Online Auction

Selling a business via online auction is a fast and efficient method of extracting the value you want from your company and moving on to the next stage. Whether that is retirement or a brand new venture, an auction sale can offer sellers distinct advantages over the ‘traditional’ sales route.

The fact that multiple bidders are typically present and competing against each other can increase the final sales price. This is opposed to in-person negotiations where one or two shortlisted potential purchasers are involved and there is less competition.

So what advice can we give you for selling your business through an online auction?

Obtain professional support from experienced advisors

Securing reliable professional advice is key to the auction process given its shorter timescale when compared with a conventional sales route. Your professional advisors will provide the guidance you need to prepare the business well, and manage negotiations, potentially with numerous bidders.

They will advise on the most favourable auction structure – one that best represents your business type and industry. Having access to professional expertise also offers reassurance that at the second auction stage where several preferred bidders are shortlisted, exclusivity is not offered too soon.

This is important because, as a seller, you may be able to obtain agreement on a range of issues at this delicate stage, before offering exclusivity, but also capitalising on a buyer’s serious interest in your business.

Prepare well in advance of the auction

Good preparation underpins a successful business sale at auction and this can be an intensive phase for directors. Once an auction commences, however, the time drain on management can be reduced.

With control over the auction timetable, you may be able to influence the outcome by offering incentives to seriously interested parties. Early exclusivity under certain terms and conditions that benefit you as the seller, for example, can encourage higher outright bids and move the process along relatively quickly.

The success of this is dependent on good preparation, however. Being able to provide reliable and accurate information to bidders when required instils confidence that you are a highly competent and trustworthy business owner. 

Tailor indemnities to your advantage

The control provided by an auction sale is notable throughout the process but the ability to incentivise potential purchasers is significant. You may be able to tailor any indemnities to your benefit in the final sale agreement, for instance.

Rather than being led by the purchaser during this stage, by selling at auction you could limit your exposure to future risk - indemnities heavily influenced by buyer demands in a conventional sale scenario can be burdensome for sellers.

A significant benefit of running an auction business sale is the control it provides to the seller. You can structure the auction to elicit numerous bids or, if strong competition exists between just a few serious bidders, restrict the auction to only those.

Selling by auction offers suitable businesses a valuable alternative sales mechanism, which you may not have previously considered. It offers a multitude of advantages and can result in you achieving your goals in a shorter timeframe.

This article was written by guest author Paul Williamson of Selling My Business. Paul’s expertise is in the valuing and sale of businesses and commercial properties on behalf of clients.