Why Businesses Don’t Sell

Why Businesses Don’t Sell

It’s an owner’s worst nightmare: Preparing your business for sale, putting it on the market, and waiting for offers . . . and waiting . . . and waiting . . . and waiting.

Although I’d love to live in a world where all small businesses sell for top dollar, the reality is quite different: Only about 20 percent of businesses for sale will successfully transfer to another owner.

Why is this the case? While no company is guaranteed to sell, you can do your best to avoid this situation by putting a strong exit plan in place years before you want to leave and by steering clear of the following Achilles’ heels:

The Owner Is Too Involved

• Remember: You’re not a saleable asset. If you’re the sole source of leadership, sales, vision, and morale for your company, a buyer isn’t going to be interested. They want a business that runs independently of you and will continue to be successful without your presence. (For more on why it’s a good idea to get out of the office, read our blog post “Increase Your Company’s Value By Taking a Vacation.”

Industry Growth Is Weak

• This is an obvious one. If your industry isn’t faring well in the larger economy, it makes sense that there might not be buyers jumping at the opportunity to take over. Instead of postponing your sale (although that could be an option, too), consider expanding your services and offerings. Not only could this give your company a boost in your industry, it also shows the buyer that your business has room to grow.

Financials Are Unorganized

• No buyer wants to see messy, outdated financials. This can hurt you significantly in the sales process. Before your sale, be sure to perform an internal audit using GAAP—generally accepted accounting principles. When the time comes for the buyer to look into your books, your financials will be clean and understandable. You and your buyer will be speaking the same language.

Management Is Weak

• Focus on hiring motivated, passionate, and competent management now. Hire people smarter than you and let them take over. A stellar management team will become one of your company’s key selling points. Without it, a buyer simply isn’t going to be interested.

Lack of Repeatable Processes

• If your buyer can’t understand what has made you successful in the past, they’re not going to have confidence in your future. You should have a comprehensive owner’s manual prepared for your future buyer. Need help writing one? I go into detail on the process in my book Walk Away Wealthy.