Why isn’t my business selling?

Almost nothing is as upsetting to a business owner than listing their business for sale and then having it sit on the market for months with no activity on it!  “What is wrong, why haven’t you sold my business” you ask the business broker.  The answer might be complex or very simple.  The best thing [...]

Almost nothing is as upsetting to a business owner than listing their business for sale and then having it sit on the market for months with no activity on it!  “What is wrong, why haven’t you sold my business” you ask the business broker.  The answer might be complex or very simple.  The best thing to do as a business seller is to ask yourself a basic question.  “Does this offering make sense?  Would I buy my own business as presented?”

Put yourself in the Buyer’s shoes and price your business accordingly.  First of all the asking price and terms have to make financial sense relative to the historical earnings of the business along with future positive outlook for the business and  its industry.  In a great many cases, it’s the asking price that is preventing the sale.  Next take a look at the terms.  If the business has been approved for SBA financing then terms shouldn’t be a problem.  If the sale doesn’t qualify for outside financing and the seller wants more than 50% down payment then you are likely to have a problem.  Ask the business broker to show how the business would cash flow for a new owner.

Goodwill will likely be the most valuable element of your business.  A credible Confidential Business Review will substantiate the value to a Buyer and increase the likelihood of getting a reasonable offer.  Make sure that the business broker has been able to create a Confidential Business Review of the business that paints  an accurate picture of what is going on with your operation.  There should not be any significant gaps that would cause a serious buyer to wonder why relevant information is not included.  That is one of the best ways to turn off a good buyer.  While no two businesses are exactly the same, they do share many common elements and the buyers want to compare these elements from business to business.

Finally, make sure you’re getting the word out to the right buyer. Have a complete understanding of what the business broker is doing to market your business.  Sometimes an owner will know of something that would help the marketing efforts of the broker and should let the broker know right away.  This might be something like a particular trade journal or industry conference.  Don’t forget that this is a team effort.

By Kendric Foultz CBB, BizEx Business Broker Profile 310-882-2200 Ext 102

Selling a “used” business

On April 23, 2010, in Business Valuation, How to Buy, How to Sell, by Kendric Foultz

To help a small business seller understand how buyers value businesses, I like to use this analogy.  If you bought a nice car fifteen years ago and took very good care of it, chances are that it looks pretty much how it did when you bought it.  It still runs great and does the job [...]

To help a small business seller understand how buyers value businesses, I like to use this analogy.  If you bought a nice car fifteen years ago and took very good care of it, chances are that it looks pretty much how it did when you bought it.  It still runs great and does the job that you got it for in the first place.  If you take care, it could keep going for decades.  Now let’s say you bought that car for thirty thousand dollars.  What do you think you could get for that car today?

Now look at the business that you started fifteen years ago.  Isn’t it doing the job today that you built it for in the first place?  You’ve taken care of it, invested in keeping it current, it does the job it was designed to do; so, why in the mind of the buyer is it worth less than what you think?  The first reason is financially driven.  Just like selling the used car, there is a market for used businesses.  Look up the specifics on any used car and you’ll find a range that the car will sell for.  The same is pretty much the case for a business.  The second reason is emotional.  The buyer does not have fifteen years of their life invested in your business and doesn’t care what it took you to get it to this point.  You may have invested more money over that time into this business than it is even worth today.  The same is most likely the case with that used car.  The car has gotten you down the road literally and the business figuratively.

So if you love that old car and can’t sell it for what it is worth to you then why sell it at all?  Maybe your life needs have changed and you need a truck instead of a car.  Maybe there just isn’t room in the garage now that you’ve gotten a new car.  Whatever the reason, it must be compelling enough to cause you to let go.  The same is true for the business.

By Kendric Foultz CBB, BizEx Business Broker Profile 310-882-2200 Ext 102