For sale by Nick Youngson CC BY-SA 3.0 Pix4free
In our previous article on this topic, we looked at how a business itself might prevent it from being sold. In this article we will look at how sellers and buyers can prevent a deal from coming together.
Seller-Related Reasons
1. Unrealistic Valuation
We’ve warned against the thinking of “I need this much to retire, hence my business must be worth at least that.” That’s not how this works. You can get a basic valuation from one of our advisors to get the lay of the land, but bankable deals need certified valuations. Remove your emotions and “needs” from the outcome: numbers don’t lie.
Unrealistic valuations are one of the top three reasons businesses never sell.
2. Due Diligence (both buyer and seller)
We point out that business transactions represent, at minimum, a seasonal part-time job for both parties. If sellers do not respond in a timely manner to diligence requests, trust can erode and eventually evaporate, killing a deal.
3. Poor Marketing
We are proud of the way we market the businesses we represent. Each of our advisors has cultivated a solid group of buyers who are keen to get hold of healthy businesses. We know which businesses will be good fits for our buyer pool. But we aren’t satisfied there. We make sure that we market the business in many different ways so that sellers have the opportunity to consider multiple offers from different types of buyers.
4. Change of Price or Terms
Once we get an Offer to Purchase executed, our assumption is that there will be no dramatic changes in price or terms heading towards closing. Sometimes, for what can only be suspected as self-sabotage, sellers (or buyers) will tank a deal by insisting on last-minute changes…even on the day of closing. Needless to say, those deals often blow up.
Buyer-Related Reasons
5. Lack of Buyers/Qualified Offers
Without qualified buyers, there is no chance to sell the business. This sometimes happens with a solid business: it’s just not the right time for the market. But without a good buyer pool even solid businesses can sit on the shelf.
6. Advisors Interfere
Whether it’s a financial advisor, attorney, or accountant, we can see deals blow up because of poor advice. Make sure that you are running this deal, not your advisory team. They are there to give their opinions, not make decisions or demands.
7. Financing
It doesn’t matter if a buyer is a perfect fit for your business if he/she doesn’t have the funding or can’t qualify for a loan. There’s always the possibility of seller financing and/or earnouts, but sellers are often less agreeable to such arrangements, particularly if there are other buyers who don’t have those struggles.
Do you want help navigating these issues? Give us a call today.