Selling a business is no easy business. In fact, more often than we would like, a business for sale gets all the way through escrow… only to fall out right toward the end, for a variety of reasons. Sometimes the reasons are legit; others times they are downright silly.
Here we will address the top issues that stop a business from selling:
1. An overpriced business: This should be as obvious as the morning sun, but it is the number one overarching reason businesses do not get sold. The sellers are asking more than the business is worth. A broker should be able to get a fairly accurate idea of what a business is worth based on the gross sales, the expenses, the assets, and the market. But a lot of brokers either fail to tell the seller the bad news, namely that “the business is not worth what you are asking”, or they don’t really know how to find out and let the seller determine the price, where higher is always assumed better. For whatever the reason, overpricing kills a sale. Buyers either won’t offer on something they think is grossly overpriced – or – in reaction to an unrealistic price they business for sale compensate by making an offensively low offer.
2. An unmotivated seller: If a seller really doesn’t care if the business sells or not, and is just throwing out a hook to see if something bites, chances are the property or business is going to be a tough sale. People find ways to make things happen when they are motivated; conversely, they will look for ways to avoid making things happen if they are not motivated. A seller of a business must WANT to sell a business.
3. Poor books and record keeping: Businesses for sale can look great on the advertisements and attract a lot of interested buyers, but if the books are messy or non-existent a buyer with a brain probably will not want to lay down cash on a measly promise. If a business claims to make money, the books better show it. If they don’t, why don’t they? It amazes me how some business sellers think buyers should simply believe them. Buyers are no different than sellers, and need to see the numbers to make an intelligent decision.
4. Seller wants all cash: Here is another deal killer – the seller needs all cash. No seller carry, and no loan. The problem here is pretty obvious: not too many people are sitting on tens to hundreds of thousands in cash, and ready to spend it. Usually those people are interested in buying bigger businesses, and using their cash as down payments. When sellers get demanding on terms, especially in these leans times, their business for sale doesn’t demand much attention.
5. The owner is primal to the business: A lifestyle business that leans heavily (if not entirely) on the personality or connections or skills of the owner, is going to be a hard sell. This reality may come out in due diligence, when buyers begin to realize all the income is based on the woman selling the company, her skills and talents and attraction factors… and they can’t duplicate her.