PRLog - June 16, 2009 - MINNEAPOLIS -- THE 3 BIGGEST REASONS WHY SMALL BUSINESSES DON’T SELL…
Jeff Slaton NetWorth Business Brokers
(Or sell for far less than their “true real value” and unfavorable terms)
1. MOST SMALL BUSINESS OWNERS FAIL TO PLAN OR HAVE NO EXIT STRATEGY AT ALL.
It takes time, planning and money to start and run a business. And it takes the same to sell a business. So why do most small business owners attempt to sell without a plan? The primary reason is because they don’t know how or where to begin. Owners often turn to “trusted advisors” like their accountant or attorney…only to find they have limited knowledge in the field of selling business (their real job is to practice accounting, tax and/or law) or they turn to a realtor who are typically a “list and see” services (like selling a house). No matter how large or small the business is, if the owner wants the best possible price under the most favorable terms, a comprehensive selling or exit plan is paramount. The plan should include; how to identify the universe of buyers, how to keep confidentiality, maintaining or growing the business while in the process, working with buyers, assets, due diligence, financing, facilities, selling memorandum and of course financial documentation and support necessary to demonstrate the viability of the business.
2. MOST SMALL BUSINESS OWNERS DON’T KNOW HOW OR WHERE TO FIND “REAL AND TRUE” QUALIFIED BUYERS.
It takes continuous advertising (and lots of it) to find potential business buyers. Most small businesses (and brokers) turn to local newspapers to find buyers. Newspapers are ineffective because they allow for very limited information, are short term, (thrown away) and most serious buyers are not looking in newspapers to buy businesses. Sure, there are “bargain raiders” looking in the paper who want to steal the business. But real qualified buyers turn to experts for assistance in business acquisitions. Marketing for business buyers must be a 24-hour a day, 365 day per year process in order to bring multiple qualified buyers with the ability (money and/or credit) and true desire to buy the offered business. Buyers could be across the street or across the globe but will never know you exist unless you let them know your there.
3. MOST SMALL BUSINESS OWNERS HAVE AN “IDEA” OF WHAT THE BUSINESS IS WORTH BUT CANNOT DEFEND, PROVE, JUSTIFY AND DOCUMENT THE ASKING PRICE.
Demonstrating the true value of the business is one of…if not the most difficult and important tasks in the selling process. If the owner cannot prove the asking price or show the true viability of the business, the buyer simply will not or cannot pay the asking price. In the selling process, the seller will always be asked to provide tax returns and financial statements. Because all small businesses attempt to minimize tax, the returns are not a good basis for determining the real value. If the owner sells the business based on “book value” and taxable income and cannot demonstrate the true underlying value to the buyer, the business seller could be leaving thousands of dollars on the closing table, force the buyer and the buyers’ banker to make those determinations and/or may not be able to find interested parties at all. The solution to this dilemma is to properly document the business using industry norms/standards and “recasting”
It is estimated that at any given point in time, there are over 3 million businesses for sale in the United States. (Not including franchise opportunities or those just “wishing and hoping”.) To get the most you can reasonably expect with favorable terms, planning is essential for success!
Jeff Slaton is with http://www.NetWorthBusinessBrokers.com belongs to one of the nation's largest networks of business consultants. Jeff has been working closely with business owners for more than 10 years, ensuring their sales, marketing, financial, and exit objectives are successfully executed. NetWorth Business Brokers delivers face-to-face business consulting to small business owners seeking a future exit from their companies. He can be reached at Broker@NetWorthBB.com or 612-419-2905 for more information.
The current recession brings about a unique opportunity to sell your business for top dollar. With over 10 years experience in more than 200 industries, NetWorth Business Brokers Management has weathered the challenges of our economy's peaks and valleys. We continue to net positive results for Minnesota business owners, with a high level of customer satisfaction. Contact Jeff today to find out why now may be best time to sell.
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NetWorth Business Advisory M&A is a company of people who believe all independent business owners have the right to a fair price when they sell their company, or to follow a strategy that will create the highest value during their ownership.