90%
Up to 90% of the business owner's net worth is tied up in the business
75%
For lack of planning approximately 75% of businesses never sell
66
There are 66 potential obstacles to the successful sale of a business.
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In the last issue (#10), we discussed SDE and Business Valuation Variations amongst Sellers, Buyers and Lenders. In this issue we will discuss The Importance of Setting a Realistic Offering Price.
A Favorite Famous Quote
"Facts are stubborn things." Ronald Reagan
Throughout our newsletters we've stressed that only about 20 - 25% of all small businesses ever sell. There are lots of reasons for that ugly statistic, but the number one reason is owners' lack of realization of the need to plan for the sale of their businesses. Without planning, all sorts of obstacles are encountered that have the potential to detrimentally affect salability.
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Rated extremely high on a list of reasons businesses don't sell, perhaps as high as #2, is owners who try to sell their business at an unrealistic offering price. |
Some owners think they can find the greater fool to acquire their overpriced business. Others may overprice the business to intentionally leave negotiating room. Others are misled by untrustworthy business brokers who accept overpriced businesses because they are desperate for listings. Some owners may not even realize their business is overpriced.
You will not be successful in finding the greater fool. Although most of those looking to acquire a business are first-time buyers who might make a foolish offer, ultimately they use qualified professional advisors in the due diligence phase. In addition, when a buyer applies for a loan for the acquisition, the lender will not provide financing above the fair value of the business. Foolish buyers will eventually come to their senses and back out of a transaction based on the advice of their professional due diligence advisors and their lender. Unless you are open to a significantly reduced offer, the transaction will die and everyone will have wasted their time. That can be emotionally painful because your high hopes are dashed.
The value of most small businesses can usually be established in a pretty tight range (within about 10%). Pricing the business above the top end of the range for negotiating purposes is counter-productive. Many qualified and serious buyers, those who have been looking for a while and have previously been through the trials and tribulations of dealing with unrealistic seller expectations (only to be disappointed), take a pass on pursuit of businesses they know are overpriced. They don't want the headaches.
Overpriced businesses are a huge problem in the business marketplace. It happens much too often. Inexperienced and less-than-truthful business brokers are major contributors to the problem. Far too many business brokers, in need of businesses to sell, will accept overpriced listings ...
This 90-issue email newsletter series provides information about:
This 90-issue email newsletter series provides information about:
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Insider Secrets to Selling Your Business
Packed with insider secrets to help you begin the process of thinking about your exit strategy. Whether you intend to sell in two years or ten years, this is a MUST READ!
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Why It's Important to Plan the Sale of Your Business
If an owner recognizes the need to plan for their business sale and executes a plan to identify and address the obstacles to a sale, the 3:1 odds against a successful business sale can be reversed to 3:1 in favor of a successful business sale.
