Top Reasons Why Some Businesses Don’t Sell

Below is a list of some of the top and main reasons why some small businesses don’t sell in the Arizona market and beyond.

  1. Business Is Overpriced: Statistics from “business for sale” portals like bizbuysell.com indicate that the #1 reason why most small businesses don’t sell is because they are perceived as being overpriced. Its very important for owners/sellers to establish a realistic and credible asking price for their business that can be supported on a number of levels including financial history and market comparables.
  2. Insufficient Business & Financial Information: In my experience most buyers will not move forward with a purchase unless their is sufficient information to review and validate the target business is a good investment. It is imperative that sellers prepare and provide sufficient information to prospective buyers such as a business summary profile, equipment list, and most importantly current and past financial statements and tax records prepared by your accountant or CPA.
  3. Seller Is Not Flexible: In most small business sales there are usually going to be a number of issues that the Seller may have to show some flexibility on in order for the buyer to feel comfortable enough to move forward. This would include being open to offering some type of seller financing with terms as many banks will traditionally not provide financing for small business acquisitions. The Seller should also be flexible and prepared to offer a more than adequate training and familiarization period to reassure the buyer before the closing and to ensure a successful transition after the closing. And most importantly, the Seller should be prepared to be negotiable if necessary regarding the price and terms of the sale if a very qualified buyer presents a serious offer.
  4. Seller Is Not Adequately Motivated: Sellers should be prepared to spend more than adequate time with prospective buyers to properly show the business and provide sufficient (qualified) information in the sales process when requested. This is most important after a purchase contract has been signed and a buyer has begun the due diligence process to determine if the information presented by the seller can be validated to the buyer’s satisfaction.
  5. Insufficient Market Exposure : Sellers should be prepared to have their business confidentially listed and marketed for a minimum of 6 months. The Broker hired to market and sell your business should offer or have access to multiple marketing channels and platforms to generate sufficient buyer inquiries and ultimately offers to purchase. Finding the right buyer for any small business is ultimately a numbers game.
  6. Customer Concentration : Sellers should be keenly aware that having any one customer or client who accounts for over 15% of  your sales may be considered a serious risk factor by some buyers and lenders. Although its not always realistic (particularly in some industries) or easy ideally you should endeavor to make sure that no single client represents more than 5% of your sales.
  7. New or Recently Established:  For a number of reasons it is often very challenging to get a buyer to move forward on purchasing a business that has been established less than 2 to 3 years. In most cases less than 3 years established that is just not enough time to build a history or track record that the business can demonstrate a proven and profitable business model.

Please fee free to contact me now if you have any questions.