While Small Business Deal Advisors helps owners sell their small businesses, there are inevitably times that businesses don’t sell. While no case is identical, here are a few reasons that some businesses don’t sell.
- Unrealistic Expectations – Some business owners feel ready to sell but have expectations that get in the way. The main indicator is not understanding business valuation. Naturally, business owners feel an emotional connection to their companies. This often leads to unrealistically high valuation expectations. Another possible reason would be “lifestyle businesses” that focus too much on short-term personal compensation than long-term value. Small Business Deal Advisors assists business owners to understand the value potential early in the process to avoid frustration when offers don’t stack up with expectations. In some cases, unrealistic expectations prevent deals from ever materializing as buyers shy away from opportunities where owners are perceived to be overvaluing their business.
- Businesses in Decline – One more common reason is selling too late into a decline. After performance drops, it is natural for an owner to dig their heels in and attempt to turn things back around or wait it out. Unfortunately, in some cases, the decline continues to manifest and even accelerate. Eventually, the owner decides he or she isn’t able to “right the ship” and wants to sell the business. Businesses that have seen significant recent challenges face a much harder time on the market. Buyers will be highly cautious investing in declining companies. They don’t want to catch the proverbial “falling knife”. Additionally, most buyers are not well-equipped to manage business turnarounds. A common result in these situations is a couple of buyers submitting offers that appear too low from the seller’s perspective. While it is certainly possible to find a buyer for businesses in decline, it isn’t nearly as simple as selling a profitable, stable operation.
- Remote Location – Businesses in remote locations are often more challenging to sell. The buyer pool is narrowed to people living in the area or who would be interested in living in the area, which can be very limiting. Buyers may also consider the lack of available talent to hire in remote locations as a challenge to growing the business, adding further uncertainty to the transaction.
- Buying a Job or Heavy Reliance on the Owner – While small businesses are typically run by their owner, certain businesses appear more similar to a job, than a company. In these cases, the owner might perform all work duties without any employees. Most small business buyers are less interested in “buying a job” than buying a company that continues to run, to some degree, if they aren’t there. Similarly, companies that have a heavy reliance on the owner are more difficult to sell. Buyers will question if they will be able to fill the hole left by the seller. Again, this often leads to buyers who pass or who submit offers below what the seller is willing to accept.
Is it impossible to sell businesses in decline, businesses in remote locations, or businesses that rely heavily on ownership? Of course not. Small Business Deal Advisors provides comprehensive marketing that seeks to mitigate any disadvantageous business attributes; however, it is important that business owners listen to reasoned business valuation advice as well as pay attention to buyer comments, reasons for passing and real market feedback overall.