Our Top 4 Reasons Why Businesses Do Not Sell

sell a business

sell a business

With over 100 collective years’ industry experience we have seen many successes for our clients, but the fact remains that in the UK, four in five businesses do not sell and without a company like Evolution CBS on your side, the odds are against you.

Many of our clients have tried previously and learnt the hard way. Fortunately, in many cases we were able to help them exit on second attempt.

Some of the issues were unique to the business or business owners, but most have common traits that can be shared to help to prevent your future deals from falling apart.

WATCH – Evolution CBS CEO and exit planning expert, Rob Goddard, explain the most common reasons why businesses do not sell:

Alternatively, read on to find out our top four reasons why these businesses encountered failure the first time around.

Lack of Preparation

“Most business owners think in months, not years, ahead of exit”

Lack of preparation and exit strategy is by far the most common mistake that business owners make.  Just as you would re-decorate your house before putting it on the market, it is vital to address several key aspects of your business before listing it. Financial documentation, sustainable profitability, lease issues, staffing problems and other concerns will not only impact saleability, but also the price that you ultimately can sell for.

Many of the business owners that we talk to say that they want to sell in 3 to 5 years. If true, the time to start preparing to sell their business is right now. Apart from the business issues mentioned above, there are many other things to consider, most notably the tax implications and what to do with the cash upon completion of the sale, which in many cases needs to be prepared for well ahead of time.

Financial Reports

“Will the financials stand up in due diligence?”

When you’re preparing to sell a business, it is crucial to know your numbers; not just where the business is at the current time but what it will achieve in the future.  That’s what you’ll be selling, so you will need to produce realistic financial forecasts that you can explain and substantiate. And, just as importantly, you will need to present the assumptions you have made and the basis on which you have made them –for example sales and marketing initiatives, forward order book, recently renewed contracts, competitive intelligence etc. This shows systems, processes and an understanding of what makes your business tick. This will reassure a buyer that the business will continue to do so when they take over.

You will also need to produce monthly management accounts that demonstrate the business is on track to meet its forecasts, so make sure you have a robust financial argument that underpins your company’s growth potential.

Owner Reliance

“If you are the engine in the car, what happens if you take the engine out?”

If you are the business, you will find it difficult to sell the company as it is totally reliant on you.  If you do achieve a sale, it is highly likely that you will have to stay with the business, working for its new owners. Some entrepreneurs pride themselves on the fact that their company cannot run without them. They keep the major customer contacts and supplier relationships to themselves.

We often find that even operational logistics and other key aspects of the business are not adequately documented. As a result, if you (the primary source of the businesses success) walk out of the door when you sell, the business will fall apart.

Our suggestion is to ‘skill up’ the people around you and have an outstanding number 2 that can run the business without you. Having a management team capable of continuing the business uninterrupted will greatly improve your ability to exit.

Unrealistic price aspirations

“Most owners want double or triple what the business is worth today”

It is not unusual for business owners to have high expectations of the price that they will receive for their company when it is time to sell. This often leads to unrealistic asking prices that make potential buyers reluctant to get involved.

Experienced buyers will always have a price in mind, calculated on a range of factors of which financial performance is probably the most obvious, but not always the most important. Whilst sellers also will have a price in mind, in my experience most business owners arrive at a value based mainly on personal desire.

That “value gap” can be bridged; sellers can, with time and careful preparation, increase the worth of the business and also take steps to reduce a buyer’s transactional risk; something that ultimately benefits both parties.

Sellers who have taken the time to conduct a thoughtful valuation process before assigning an asking price are more likely to achieve a faster and smoother sale.

If you do not know what your business is currently worth we have a great tool to help.  – CLICK THIS LINK to start your valuation TODAY.

At Evolution CBS, we are passionate about customer service. For us, every client’s needs are unique and our bespoke solutions are designed specifically to meet those needs and are delivered by specialist teams with the experience and resources you’d expect from a company with such a long pedigree.

Our values of professionalism, pragmatism and integrity run through every aspect of our business so, as you would expect, we are absolutely transparent about our services and our charges.

If you would like to discuss how we can help you with selling, growing or buying a business, please call us on +44 (0)118 322 4688.

 

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