Manage Your Business
Why Businesses Don't Sell
The six principle reasons businesses don't sell.
By Nathan Kelly, Webmaster, SYOB
- Business is over priced
A business will not sell if it is over priced. Research your local area or Industry to ascertain what the market will pay for your type of business.
Some industries sell at 2 to 5 times the net profit, the higher the demand the higher the multiple. For example:
- Post Offices will sell for approximately 4 - 5 times net profit
- Management Rights about 3.5 - 5 times the net profit
- Car Wash about 3.5 - 5 times the net profit on a leased business
- Lack of information
It is amazing how many sellers try and sell their business without supplying any information to potential buyers. Most buyers will not purchase a business if there is insufficient information to demonstrate that it is worthwhile buying.
The preparation of a good profile not only encourages a buyer to buy, but it also educates their accountant and financiers as to the attributes of your business. The best way to evaluate this is to ask yourself the question "what would I want to see if I was purchasing a business"? and then double that.
The more information you can supply the better your chances.
- Lack of exposure
Whether you choose to sell the business yourself or through a business broker, you will have to pay for advertising. If you cannot afford to do this then do you really have a business to sell?
You can't sell a secret!
- Lack of motivation
If you are not prepared to spend time with genuine buyers and tyre kickers then you should appoint a business broker to represent you through the process. Unfortunately not all buyers will buy your business, you should prepare yourself to invest time dealing with people who may appear to be wasting your time.
When a buyer asks for information you should have it ready immediately to avoid losing their interest. You should however protect that information and only make certain information available at the appropriate stage of negotiations.
Ultimately if you are not motivated to invest in preparing your business for sale, invest in exposing the business to the market or providing relevant information, then your business will not sell.
- The business has been misrepresented in some way
So many times sellers go to all the effort and expense of trying to sell their business only to have it all fall apart during the due diligence period.
They have misrepresented their business to an extent that a buyer no longer trust what the seller says.
Be honest and don't try and hide anything. If the business has problems fix them, if you can't or don't want to make sure the asking price reflects the true value.
- There is no market for your business
You're in a niche of your own and there are very few people looking to buy in that market. Unfortunately, if there is no market for your business, you won't know this until you test the market.
READY TO SELL YOUR OWN BUSINESS?
Selling Your Own Business is a concept that more small to medium sized business owners are choosing to do. SYOB assists small to medium sized businesses prepare their business for private sale.
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