Which Businesses Cannot be Sold?

In our business brokerage practice we frequently receive calls from business owners almost desperate to sell their businesses. Owners start by explaining their business and the huge potential it has for the near future. Then, when I ask about their bottom line, they become very uncomfortable talking about it. These are generally businesses started in the two previous years with unproven business models. The owners made important investments in equipment, leasehold improvements and employee salaries but could not recover their investments for multiples reasons. Naturally the option to sell the business appears very attractive since it seams an easy way to get rid of this money losing business.

Unfortunately, it’s not that easy. Most business buyers are looking to buy a business as a way to make a living. Small business purchase is like buying job. If these buyers were looking to take the risk of buying a money losing business that “has potential” they would have started one themselves instead of buying it from somebody else. Nobody wants to pay for others’ business mistakes. There are many possible solutions for an entrepreneur who invested in a new business that he couldn’t make profitable, but selling the business after one or two years of its inception is clearly not a realistic option.

Possible solutions include product line improvement, cost reduction, strategic partnership, more leadership, owner skill improvement, new service addition and many others. Once the business is established and has demonstrated that it has a valid business model, then the owner can sell it at a reasonable price.

Other businesses that are very difficult to sell include:

  • Companies whose top and bottom lines are deteriorating year over year.
  • Businesses that are too highly priced.
  • One man show businesses (very dependent on one person whether it is the owner or an employee).
  • Companies very dependent on one large customer.
  • Businesses whose owner are not ready to sell and/or are too emotionally attached to their companies.
  • Companies whose owners are dishonest, are misrepresenting the business and/or misleading the buyers.

If you are a business owner intending to sell a business that falls into some of these categories, then you will get a huge return if you take some time to improve your business to make it more sellable before spending tremendous time and money trying to sell a business that nobody will buy .

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