Selling a business is an exciting time, especially if you’ve spent many years of your life building this business from the ground up. If you have an excellent platform, solid assets, and lucrative prospects for the future, you should have no trouble generating interest in your enterprise.
Even so, you may find it harder to close a deal than you first expect. Why do businesses fail to sell and what can you do about it?
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Why Businesses Don’t Sell
In the mergers and acquisitions world, most businesses don’t sell for one (or more) of the following reasons:
1. Bad Pricing Strategies
One of your issues may be a bad pricing strategy. There are several ways this can manifest. For starters, you might be pricing your business too high; if your expectations are unreasonable or if you ask too much of your prospective buyers, you’re not going to invite much interest. You can mitigate this problem by hiring experts in business valuation so you can get an accurate estimate for what your business is worth. Additionally, you need to be careful not to reveal your full hand too early in negotiations; if you do, you could lose the deal.
2. Inaccurate or Incomplete Information
Business purchases tend to be large, intensive financial deals, so buyers are incentivized to uncover every rock and examine every detail associated with the business in question. If you have any inaccurate or incomplete information associated with your record keeping, it could serve as a red flag. For example, if during due diligence, a prospective buyer determines that you misreported income in a given period, they may question the validity of all your other numbers. If you’re simply lacking information in a specific area, it could be a sign of sloppy organization or poor management.
3. Legal Issues
Legal issues can kill a deal as well. If prospective buyer grows concerned about legal issues they may face when acquiring your business, or if they have concerns about how the business is operating, they may back out. Breaking a confidentiality agreement, or not having one in the first place, can also hurt your chances.
4. Mismatched Objectives
Sometimes, deals simply fall apart because of mismatched objectives. In the course of due diligence and negotiation, a prospective buyer might realize this business isn’t a good fit for them after all; this is usually a byproduct of poorly set initial expectations. If you present the business inaccurately or if you don’t fully understand the intentions of your buyer, your chances of closing the deal will decrease.
5. Poor Strategic Positioning
Your business might not be selling because of poor strategic positioning. Have you taken the time to reorganize your business, position it for acquisition, and increase its value? If not, you might be missing out on some valuable opportunities.
6. Lack of Marketing and Networking
Your business might be amazing, and it might be genuinely worth a very high price. But if people don’t know that your business exists or if they don’t know that it’s for sale, you’re not going to get any offers. The solution to this is investing in marketing, spending more time networking, or both. Improving visibility and meeting more people will inevitably attract more offers and more attention.
7. Antagonistic Negotiations
Failed negotiations are relatively common when selling a business. Negotiations are inevitable, and to some degree are naturally adversarial. But when your goals become more antagonistic or personal, negotiations can quickly break down. For example, if you receive a low offer and you’re insulted by it, you might start making illogical decisions or you might back away from the deal entirely.
Quick Tips for Better Results
If you’re having trouble selling your business and you want better results, these are some quick tips that can help you:
· Start with a Plan
Always start with a plan. You should have an idea for how to strategically position your business, what types of buyers might be interested in your business, and how you want to approach pricing and negotiations. Don’t try to do this on the fly.
· Work with Advisors and Experts
Everything gets much easier when you have advisors and experts guiding you. Hiring a consultant to help you value the business or working with a mentor to get outside perspective could be exactly what you need.
· Remain Patient
While some business deals can close in a matter of a few weeks, most take months, or longer, to fully resolve. Try to remain patient.
· Always be Thorough. Pay Attention to the Details
You don’t need to sell your business overnight. Take your time with this stressful and (occasionally) complex process – and don’t be intimidated if you don’t enjoy immediate results. If you’re consistent and you address the most common points of failure, you’ll set yourself up for a successful sale eventually.