Only 30 to 40% of Businesses Actually Ever Sell

We worked with a client some time ago who had a good little business churning out about $10 million in annual sales. They had previously worked with a Seattle business broker on attempting to sell their business. Unfortunately, their broker failed to deliver on glorious promises and after nine months of waiting the company had no offers and no marketing materials. It was appalling at best. The fact of the matter is that this is more of a realistic scenario than most business owners realize. According to surveys approximately 30 to 40% of businesses listed for sale actually ever sell. Most experienced business brokers and expert dealers will tell you this is probably accurate. Here are some questions that come to mind that bear thought-provoking responses:

  • Why do so many businesses fail to sell?
  • What makes the difference between those businesses that sell and those that do not?
  • Of the businesses that sell, which are the most enticing and what types of companies are sold at a premium?
  • Are the non-selling companies flawed in some way? Were they priced too high?
In my experience there are several reasons a business will never sell at all.
  1. The company is overpriced. Either the owner has unrealistic expectations about his/her business’s value or the advisory firm has missed the mark on the valuing the company.
  2. It’s bleeding cash. If the business is losing money, it’s not worth it to other business investors looking for a cash-flow-positive investment alternative to the stock market. Unless the company represents a distressed opportunity, the likelihood of an investor snatching the company for tax write-off purposes is extremely low.
  3. Fundamental flaws exist. When the company has irreconcilable flaws in the business or the business model, rarely are investors going to jump at the opportunity to throw good money after bad.

If the business is large enough and is enough of a going concern to salvage, some professional M&A consulting services can be helpful in righting the sinking ship. Sometimes businesses are on the unfortunate path to self-destruction. Unfortunately, this is often the result of creative destruction and not necessary the consequence of ignorant or failing business operators. In short, some businesses are difficult or even impossible to save.

Having real-world experience in the size and type of transaction in which your business sits, is helpful for having a successful exit when selling your company. Entrepreneurs must also bear in mind that sometimes the right consulting firm can help right the wrongs prior to the sale in order to assist you in selling the business for the maximum amount possible. If owners can increase the value of their companies by several thousand by making some time-intensive tweaks, it can mean a great difference for the entrepreneur, especially if he/she is planning on moving into retirement. You can avoid being a statistic like the other 60 to 70% of businesses that actually do sell by going through the business sales process right the first time.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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