A recent survey of top business brokers inquired about the reasons some businesses sell and others do not, the reasons some businesses sit on the market for years, and others do not. Here are the main reasons that businesses do not sell successfully or quickly:
Reason 1: The business is overpriced. This accounts for over 60% of the reason a business does not sell. The best way to avoid being overpriced is to have your business valued by an expert in valuation of a business, one who is also very familiar with current market trends. Studies have shown that businesses that do not use a business broker and a mergers and acquisitions service have about a ten percent chance of selling. Further, businesses that choose to use a valuation expert are more likely to sell at a higher price.
Additionally, a business that has had a proper valuation usually takes less time to sell. This is important because the longer it sits on the market, the less appealing it may look to potential buyers. They may begin to wonder why the business has not sold.
Bottom line: Price the business objectively and correctly, and the chances of it selling increase.
Reason 2: The equipment and facilities need work. Buyers who look at your business are assessing the business’ equipment, fixtures, and facility. Because of this, they expect all of these items to be in good working order and may seek proof of routine maintenance on the larger equipment. In order to prepare for this, make a list of all equipment and fixtures, including model number and serial number.
Bottom line: Keep all fixtures, equipment, and the building properly maintained and document that maintenance.
Reason 3: The owner cannot identify why he or she is selling. Buyers almost always ask why an owner has decided to put the business up for sale. If the seller cannot offer a good explanation for the sale, then buyers may think the worst. Some buyers may worry about some secret reason the seller is selling, for example, competition, a declining industry, or otherwise
Bottom line: Be able to verbalize the reason for the sale of the business.
Reason 4: The seller has no team. In order to make the sale of your business a successful process, you need experts to offer guidance, knowledge, and support. Selling a business is a very specialized service, and so a qualified business broker is vital to predicting the outcome of the sale. This business broker will handle the valuation, marketing, structuring of the deal, and finalizing the sale. In addition, a licensed business broker can handle any emotional issues that may come during the course of the sale.
In a survey of leading business brokers, these experts revealed why some businesses sell quickly while others remain on the market for years.
Bottom line: Hire a business broker for his or her valuable expertise. It will pay off in the end.
Reason 5: The business is not packaged the properly. Sellers who are unprepared for the sale of their business will most likely not sell. This is why only 20% of businesses sell and 80% do not. Often a business owner tries to sell the business themselves and they do not know how to package a business properly. With a competitive market and being in the age of information, buyers are savvy. This means that the price is based on a proper business valuation.
Bottom line: A well trained broker can properly package the business beforehand to help the sale complete quickly.
Reason 6: No strategy to Target buyers. A seasoned business broker will design a marketing strategy to attract the best buyers for your business. For example, will a private buyer purchase the business? Or will an investment buyer seek it? Then the broker can package the business for that type of buyer.
Bottom line: Make sure your brokers knows the market, identifies the type of buyer that fits your business
Reason 7: The seller does not understand how to negotiate. A qualified, experienced business broker can help with this stage. Buyers should avoid becoming emotionally involved in the sale of the business that they may have spent a lifetime building. Questions about the value of their business, for example, are not personal, but rather a sign that the buyer is doing his or her homework. A business broker can help prevent this emotional involvement by remaining focused on the end objective: selling the business.
Bottom line: Let your broker negotiate so you remain objective throughout the sale process.
Reason 8: The period between offer and closing is too long. As soon as a buyer agrees to purchase the business, your broker will request an offer in writing that includes a substantial, non-refundable earnest money deposit. A business broker will take care of this paperwork and may sure the process is completed as quickly as possible. Buyers may change their mind as time passes, so complete the paperwork expeditiously and respond quickly to all requests in due diligence.
Bottom line: Respond quickly to all requests from the buyer in due diligence to prevent buyer fatigue.
By: Kimberly Deas, Murphy Business & Financial Services and Small Business Resource Network Member