Marketing a business is no easy business. Actually more often than we would like, a business available for purchase 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 absurd.
Here we will address the top issues that quit a business from selling:
1 . A good overpriced business: This should be as obvious as the morning sun, however it is the number one overarching reason businesses do not get sold. The sellers are usually 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 even they don’t really know how to find out and then let the seller determine the price, where increased is always assumed better. For whatever the reason, overpricing kills a sale. Buyers either won’t offer on some thing they think is grossly overpriced – or – in reaction to an unrealistic price they compensate by making an offensively low present.
2 . An unmotivated seller: In case a seller really doesn’t care if the business sells or not, and is just throwing out a hook to find out if something bites, chances are the property or business is going to be a tough selling.
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People find ways to make things 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 must WANT to sell a business.
3. Poor books and record keeping: Companies for sale can look great on the ads and attract a lot of interested customers, but if the books are messy or non-existent a buyer with a 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, 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 a brilliant decision.
4. Seller wants all cash: Here is another deal fantastic – the seller needs all money. No seller carry, and no loan. The problem here is pretty obvious: very few people are sitting on tens in order to hundreds of thousands in cash, and ready to spend it. Usually those people are interested in ordering bigger businesses, and using their money as down payments. When retailers get demanding on terms, specially in these leans times, their company for sale doesn’t demand much interest.
5. The owner is primal towards the business: A lifestyle business that 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 there 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 product 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 how sellers need to think like buyers. The Golden Rule applies running a business as it does everywhere else. Perform unto others… When a buyer investigates the market for the product or service and sees 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 like the seller would.
7. The business needs a license: many businesses necessitate license, 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, particular services… all require licenses and permits. There actually is a good element of licensing, in that they give some uniformity and standards to businesses. But the bad aspect of licensing is that they cost money, and… they can be exclusive. A developing license can’t just be paid for along with money, it must be earned. A liquor license has restrictions on who are able to take it over; a criminal record can ruin that possibility. So while some licenses represent a dollar amount, such as a franchise fee, others are more specific, and limit who can acquire it, and thus limit who can acquire the business that makes use of it.