Most Businesses Never Sell

 

“Historically only one-quarter to one-third of all private companies ever manage to find a buyer.”   ~ Inc. Magazine.

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Why the high failure rate?

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• Business is priced incorrectly

• Business is not properly prepared for sale

• Insufficient market exposure to potential buyers

• There are just more sellers (companies for sale) than buyers who could realistically buy and operate a business

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Who are the Buyers?

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• Employees

• Strategic same or related industry acquirers

• High net worth individuals

• Professional investment firms such as Private equity firms

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What Buyers Want?

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• Profitable business

• Experienced, loyal, and motivated employees

• Diverse customer base

• Sustainable growth potential

• Strategically well-structured business – asset / compensation / tax planning

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What’s My Business Worth?

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• Unlike in real estate, comparables can be unreliable because almost every business is unique in costs, expenses, profits, and management

• Unlike public companies, market share equity prices are unknown in a privately held business

• A common mistake is to use simple multiples or “rules of thumb”. This is what Business Brokers often do.

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Key Factors to Successfully Sell a Business

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• A business that does not have too many “issues” or eccentric features that can scare away a buyer. A business ready for sale is one that is prepared well in advance

• Realistic Pricing in line with the market

• Provide the buyer with a fair market salary

• Availability of Capital, both debt and equity

• Service acquisition debt in 3 -5 years

• Fund capital expenditures required to maintain historic revenues

• Provide a reasonable return on investment

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