According to surveys approximately 30 to 40% of businesses listed for sale actually ever sell. Most experienced business brokers and expert dealers will tell you this is probably accurate.
Here are some questions that come to mind that bear thought-provoking responses:
- Why do so many businesses fail to sell?
- What makes the difference between those businesses that sell and those that do not?
- Of the businesses that sell, which are the most enticing and what types of companies are sold at a premium?
- Are the non-selling companies broken in some way? , or just priced too high?
- The valuation of the business is too high, in some cases by as much as 100%.
- The business has several family members in top management positions.
- The owner is the business. The business cannot effectively run without the efforts and know-how of the owner.
- One or two customers constitute more than 25% of the total business.
- The business’s industry is diminishing or threatened by globalization.
- The owner(s) is aging and has slowed-down, resulting in diminishing revenues.
- The owner did not take time to perform exit or succession planning. To properly prepare the business for sale, the owner should have engaged in exit planning 2-5 years prior to selling.
- Many of the financial rewards of the businesses were taken by the owner in various “perks” which, from a business valuation perspective, will not make it to the EBIDTA as add backs.
- The seller did not take time to become educated on the selling process, especially on the possible ugliness of the due diligence process by the buyer and their advisor.
- The owner did not utilize the professional services of trusted mergers & acquisitions advisor or business broker.
If the business is large enough and is enough of a going concern to salvage, some professional M&A consulting services can be helpful in righting the sinking ship. Sometimes businesses are on the unfortunate path to self-destruction. Unfortunately, this is often the result of creative destruction and not necessary the consequence of ignorant or failing business operators. In short, some businesses are difficult or even impossible to save.
Having real-world experience in the size and type of transaction in which your business sits, is helpful for having a successful exit when selling your company. Entrepreneurs must also bear in mind that sometimes the right consulting firm can help right the wrongs prior to the sale in order to assist you in selling the business for the maximum amount possible. If owners can increase the value of their companies by several thousand by making some time-intensive tweaks, it can mean a great difference for the entrepreneur, especially if he/she is planning on moving into retirement. You can avoid being a statistic like the other 60 to 70% of businesses that actually do sell by going through the business sales process right the first time.