No doubt you are coming here to this post from my ebook on selling a business. But if you are not the purpose of this short blog post on selling a business is to lay out some of the reasons the sales market is so inefficient. So here we go.
1. Small Business Owners Keep Bad Books and Records. This single element is not a broker issue or a market issue but a seller issue. In the name of saving pennies business owners maintain sloppy records or do not hire good accounting professionals. There is in this day and age no excuse for it. Short term decisions to save on taxes are another reason the books end up looking bad but there it is. CLEAN UP YOUR BOOKS.
2. When Nationally only 20% of businesses sell it is often times a function of poor marketing of the business. Sellers hire brokers and leverage them down and down on commissions. If your naive enough to think that the funds for advertising come from any source other than the profits of actual completed sales….well you get what you pay for and that usually means no sale. So here is reality…..understand your broker / intermediary business model. Do not assume capabilities and resources for each firm are the same….they are not.
3. Financing: Related to item 1 your business needs to have good books and those books dictate the ability to finance or not. Also banks are not lending money out of the goodness of their hearts. The collateralize deals and that means the assets need to be there to support the risk and the loan. Get a firm understanding of what the really means.
4. PEOPLE: People are people with timelines, experiences, friends, perceptions and the internet facilitates a firehouse of information that can either enable or paralyze a buyer and seller. Buyers and sellers alike need to pay particular attention to the emotion in the deal and the gaps that get created by lack of communication.