Why Deals Don’t Close
Sellers
- Don’t have a valid reason for selling.
- Are testing the waters to check the market and the price. (They are similar to the buyer who is “just shopping.”)
- Are completely unrealistic about the price and the market for their business.
- Are not honest about their business or their situation. The reason they want to sell is that the business is not viable, it has environmental problems or some other serious issues that the seller has not revealed, or new competition is entering the market.
- Don’t disclose that there is more than one owner and they are not all in agreement.
- Have not checked with their outside advisors about possible financial, tax or legal implications of selling their business.
- Are unprepared to accept seller financing or now unwilling to accept it.
Buyers
- Don’t have a valid reason to buy a business, or the reason is not strong enough to overcome the fear.
- Have unrealistic expectations regarding price, the business buying process, and/or small business in general.
- Aren’t willing (many of them) to do the work necessary to own and operate a small business.
- Are influenced by a spouse (or someone else) who is opposed to the purchase of a business.
Do You Really Want to Sell Your Company?
Sellers have to ask this question and give it serious thought prior to making the decision to sell. In too many instances, sellers get to the proverbial altar and then back down the aisle. In most cases, this happens because the seller’s decision to sell has not been considered carefully enough.
There are the obvious event-driven reasons such as failing health, partnership, marital issues or because the business is going downhill. In cases such as these, business owners generally don’t have a lot of options. Selling the company is the easiest and most obvious one.
In too many other cases, the owner claims retirement, “burn-out,” or some other reason, none of which is necessarily a permanent state of things. Take the example of the owner of a company who is also the founder, and after a lot of hard work and probably years of financial hardship on his part, the company is now quite successful. It is, as they say, the owner’s “baby.” The first question that needs to be asked is: Do I really want to sell? The second question is: If so, why? And the third is: What am I going to do after the company is sold? These questions involve not only business decisions, but important emotional issues as well.
Attempts to formulate answers should not be made until the owner has discussed these questions with family and personal professional advisors. There are books on exit strategies and consulting firms that deal with these issues. A professional business intermediary is also someone that has experience in this area and can provide a good idea of current pricing issues and market conditions.