Offering a business is no easy business. Actually more often than we would like, a business for sale gets all the way through escrow… only to drop out right toward the end, for a variety of reasons. Sometimes the reasons are reliable; others times they are downright stupid.
Here we will address the top issues that cease a business from selling:
1 . An overpriced business: This should be simply because obvious as the morning sun, but it is the number one overarching reason companies do not get sold. The sellers are asking more than the business is worth. An agent should be able to get a fairly accurate idea of what a business is worth based on the product sales, the expenses, the assets, and the market. But a lot of brokers either are not able to tell the seller the bad information, namely that “the business is just not worth what you are asking”, or even 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. Purchasers either won’t offer on some thing they think is grossly overpriced – or – in a reaction to an unrealistic price they compensate by making an offensively low give.
2 . An unmotivated seller: In case a seller really doesn’t care when the business sells or not, and is just throwing out a hook to see if something bites, chances are the house or business is going to be a tough sale. People find ways to make items happen when they are motivated; alternatively, they will look for ways to avoid producing things happen if they are not inspired. A seller of a business should WANT to sell a business.
3. Bad books and record keeping: Companies for sale can look great on the commercials and attract a lot of interested purchasers, but if the books are messy or non-existent a buyer with a human brain probably will not want to lay down money on a measly promise. If a company claims to make money, the books much better show it. If they don’t, what say we they? It amazes me how some business sellers think customers should simply believe them. Customers are no different than sellers, plus need to see the numbers to make an intelligent decision.
4. Seller wants most cash: Here is another deal mindblowing – the seller needs all cash. No seller carry, and no loan. The problem here is pretty obvious: very few people are sitting on tens to hundreds of thousands in cash, and ready to invest it. Usually those people are interested in buying bigger businesses, and using their cash as down payments. When retailers get demanding on terms, especially in these leans times, their business for sale doesn’t demand much interest.
5. The owner is primal towards the business: A lifestyle business that will leans heavily (if not entirely) on the personality or connections or even 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 girl selling the company, her skills and talents and attraction factors… and they also can’t duplicate her.
6. The item or service is obsolete: the vendor wants to sell because his market is drying up. Of course. Why don’t you enjoy sell your business before you have to close-up shop? Well, here again is where sellers need to think like buyers. The Golden Rule applies in business as it does everywhere else. Do unto others…
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When a buyer investigates the market for the product or service and views it is going the way of typewriters and video cassettes, he’s never going to shell out some big money merely to watch it burn. He’ll walk, just as the seller would.
7. The business requires a license: many businesses necessitate certification, especially in California, where someday you may need a permit just to use the toilet. The particular trades, the professional services, the selling of certain products, certain services… all require licenses and permits. There actually is a good element of licensing, in that they give some uniformity and standards to businesses. However the bad aspect of licensing is that they have a price, and… they can be exclusive. A building license can’t just be paid for along with money, it must be earned. A alcohol license has restrictions on who are able to take it over; a criminal record can ruin that possibility. So although some licenses represent a dollar quantity, such as a franchise fee, others are further, and limit who can acquire it, and therefore limit who can acquire the business which makes use of it.