After nearly two decades of real estate/fixer-upper/curb appeal/garage sale picker reality television, it’s easy to think that there’s a buyer for everything. That may be true – just not at every price and certainly not at any time. We’ve had business owners approach us intending to have us sell their business and we’ve had to give them the bad news right away: Not every business can be sold and theirs is one such business. Here are some reasons why a business might be considered “unsellable”:
- The business is either losing money or not making enough. This is top on the list for a reason – it’s the #1 reason we have to turn prospective sellers away. For a “main street” business (less than $3 million EBITDA), a business must do two things for a buyer: It must service the debt and put food on the table. If it can’t pass those two tests, it won’t sell. For a lower “middle market” business ($3 - $500 million EBITDA), a business must meet minimum investment returns.
- Lack of potential. A business that sells outdated technology won’t sell because there is no demand for less-than-bleeding-edge technology in the market today. Make sure your business is relevant and will be for the foreseeable future. And you can’t convince a buyer with, “If you would just _ then this could be a really great company.” The buyer will think, “If that is such a great idea, why didn’t you do it?”
- The owner IS the business. If your business ceases to operate while you’re away, or if it’s so dependent upon your skills and talents that a buyer couldn’t step in and quickly take over then you don’t have a sellable business. Consider ways that you can begin removing yourself from the day-to-day operations and train up a team of people to run your business several years before you want to sell.
- Location. If it takes a “special kind of person” to want to live in your community, your business may not be sellable. Buyers (and their spouses) need to be able to envision themselves living and working in your community.
- Easily replicated. How much would it cost – and how difficult would it be – to simply start your business from scratch? If a buyer can start a business from the ground up for less than it would cost to buy yours, you might be stuck with an unsellable business.
- External factors. These external factors could come in the form of new competition entering your market, a lawsuit that involves you, or regulatory/market forces that change the landscape of your industry. These are all deal killers that can make a business unsellable.
Occasionally, you may hear of businesses that face one or more of these challenges and they still sell. It is possible – it’s just not probable. Those are exceptions that do not prove the rule. If you think your business might meet one of these “unsellable” criteria, and you happen to come across someone who is interested in buying your business, contact a business broker right away so we can help you value the business and structure a deal that makes sense. Don’t squander what may be your only opportunity to sell!