Why Can't I Sell My Business?
Contributor Shawn Flynn
Imagine having plans to move to another country, but nothing can take place until the sales of your business is completed. The business has been on the market for what feels like forever. The first 6 months were tough, but now, as it has almost been a year without any potential buyers, there is tremendous worry. There is this deep unfortunate feeling that it will never sell.
You keep asking yourself, “Why, why won’t it SELL?”
Foundy.com is the UK´s leading platform to buy and sell a business
Here are 14 possible reasons (Leave your ideas for addition ones in the comment section below) of why you can’t sell your business:
Ridiculous expectation of price: Before listing your business for sale, really do some market research. If you put a price on the business of what you feel it is worth…it probably is a bad idea. Also, if you do get an offer and the potential buyer backs out, be careful. Many buyers will use that number as the floor price. Too many times, I have met sellers who tell me they were given an offer that didn’t go through (and looking at the business the offer was ridiculously high) only to say they won’t take any number less than that moving forward.
Financial performance in the wrong direction: If the business was doing great numbers (revenue, EBITDA, margins, hitting the right metrics) years back, but that has change and the last several years things have been getting worse and worse, heading in the wrong directions, that might be enough for potential buyers to pass on your business,
Lack of growth potential: If the business does not have a clear path to grow or if the market it operates in is stagnant or declining, potential buyers may not see it as a good investment.
Complex ownership structure: If the business has a complex ownership structure or if there are multiple stakeholders involved in the sale, (this is a big deal with some startups that don’t have clean cap tables) it may be difficult for potential buyers to navigate the process and reach a sale agreement. Instead of putting in the effort they might just see the potential challenges ahead and decide to back out.
Legal or regulatory issues: There may be legal or regulatory issues that make the business unattractive to potential buyers. Such as: Are you in a lawsuit? Have there been complaints filed? Do you have all the proper employment agreements? Have you been following all the laws with W2 and 1099 employees?
Competition: There may be other businesses in the same industry that are also for sale, and potential buyers may choose to purchase one of those instead.
Personal reasons: The owner of the business may not be willing to sell to certain potential buyers for personal reasons, such as a lack of trust or compatibility; every potential buyer might not be “good enough” to be the new owner.
The Seller is not likable; When a potential buyer meets the seller, they might not personally like that person. Maybe their “gut” tells them they can’t trust the person or they just can’t imagine having to talk with or work with them during or post the sale.
Poor reputation: Those Yelp and online reviews may not only impact the business while you are wanting to operate it, but a potential buyer might see what's online and feel the negative reputation makes the company not worth investing in.
Complex or burdensome operations: Depending on the skill set needed to run the business or the location of the business, there might not be anyone there who is able or interested in taking it over. Have you ever visited that hotel or factory that is in the middle of a desert with nothing around it for 100 miles?
Poorly trained or unmotivated employees: If the business has poorly trained or unmotivated employees, the business culture might not be appealing to a buyer.
Poorly maintained facilities or equipment: This is pretty self-explanatory, but basically things might look good on paper, but once things are checked a little closer, warning signs jump out.
Dependence on a high concentration of customers or suppliers: If the business is heavily dependent on a few customers or suppliers, there is a huge risk that just one of them leaves it could impact the business in such a major way that this risk is not worth it. Imagine a company that has three customers that account for 73% of their sales and then 200 customers that account for the rest. The seller might think that there is no concentration, but if one of the three main customers leaves, that might be enough to shut down the whole company.
Complex legal agreements: If the business has complex legal agreements or contracts in place, a new buyer might decide to take a look and find things that lead them to move on from the deal.
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In conclusion, there could be several reasons why your business may not sell. To improve the chances of selling your business, do your own due diligence in your company before taking it out to market. Really look at it from the eyes of a potential buyer. Bring in third party experts to take a look and provide feedback. Once the business is ready for sale, do your research on the market and what the current appetite is for your business and be adaptable to making changes as you get feedback. With the proper preparation, flexibility and adaptability you strengthen your position for your targeted outcome.
***The content is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of professional(s) before making any decisions. ***
Sebastian H. Amieva
Founder
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