Too often in life and business we measure things and never understand the why of them. Statistics are important “tells” but without context and background they can lead one down the wrong path.
Selling a business is no different so here are some stats to ponder in your sell process:
1. Less than 20% of the businesses that come to market ever sell: The why of this is legion and runs the gamut but in general I will tell you it usually comes down to A) Poor Books and Records B) Over priced and Poor Terms C) Poor books and Records. That’s right poor books and records!
2). 90% of buyers never buy. Here too we see a massive range of reasons…for the most part however it comes down to lack of education and understanding….buyers come to the game with a sophomoric understanding of the process and if educated incorrectly the buyer usually gets fearful (justifiably) and pulls back.
3) It takes on average 12 months to sell a business….why? See Item 1. Generally businesses are overpriced 2 to 3 times what the actual market value is. Sellers wait till the crises moment of when they must sell verse planning it. As a consequence there are unrelated forces in the transaction of retirement, medical bills, a recession (sound familiar) that make the seller act unreasonably in the deal. Eventually the seller will see reality for what it is and adjust or will fall in the bucket of the 80% that never sell.
4) Banks don’t finance Business Sales – Less than 5% of all transactions are financed with Banks. If after the last 5 years you haven’t figured out that banks are businesses (and not very well run ones at that) perhaps business is not your calling.
5) Owner Financing occurs in 90% of deals. Even if Banks are involved there will be owner financing. If you choose not to do owner financing you will not sell your business and you will in the end get nothing for the hard work and sweat.
6) All deals die at least once before closing. The more advisors, and unqualified opinions you get on both sides the more fear is inserted in the transaction. When it comes to selling and or buying it is amazing how both buyers and seller solicit the opinion of people not qualified to give the advice. Make sure your surrounding yourself with professionals who have data and experience of actually doing deals.
7) A very good brokerage may do 10 transactions a year….before picking representation choose an advisor who gets it done….not a rookie or passive player