While most business owners have a dream of eventually selling their business, the reality is that most of them will never accomplish this. According to BizBuySell’s Insight Report, only about 4-5% of companies are sold each quarter. Here are five reasons that you may have difficulty selling your company.
Not Finding the Right Buyer
In many cases, there is someone willing to buy the company, but the entrepreneur simply has no idea where to find that customer. Take a look at your company’s own industry. Which companies would benefit from purchasing a business like yours?
Your buyer might end up being your biggest rival. This isn’t necessarily a bad thing. Plenty of small businesses would love to eliminate their competition and gain access to resources and skilled workers in their industry. Selling your company to a competitor might end up making profits for both parties.
Not Finding the Right Representative
Don’t make the mistake of simply settling with the first broker that you find. Take time to interview and research different brokers or consultants that could help you sell your business. Find someone who can accurately represent your company’s strengths and get you good results without charging you too many fees.
Just because you found a good broker or representative to help you sell your company doesn’t mean that your work is over. A broker might help you generate leads, but nobody knows the company better than you do. Nobody else can brainstorm why your company is profitable and why it should be purchased.
That being said, it’s always good to be prepared in the event that you hire a broker that is unable to produce results. You should have a sales plan in case your broker doesn’t follow through.
No Revenue Model
One common reason that companies fail to sell is that many of them lack a recurring revenue model. For example, Josh Patrick from the New York Times said that one of his clients owned a company that sold security systems; the company revisits customers whose security systems are eight years old and offers them a chance to update their systems, thus creating recurring revenues.
Too Much Dependence on the Owner
Another reason that companies never sell is that the owner is the sole reason the company exists. In other words, the business will dissipate if the owner leaves the company. Become a passive owner and ensure your business is not dependent on you. Train your employees so that they can carry out their day-to-day operations without your guidance or supervision. Carefully explain your strategy to your team members so that they can execute your plan even when you are gone.
If you cannot fix these problems, you will either have to keep running the business or close it altogether. You will need to be comfortable turning your business over to someone else and know that the new owner might make changes that you wouldn’t necessarily make but that is a necessary step if you want to increase the salability of your business.