Why 80% of businesses fail to sell – Part 4

 

It is a sad fact that across the UK SME market 4 out of 5 private companies will fail to sell, meaning only 20% of those taken to market achieve a successful outcome.

In contrast to the industry average, EvolutionCBS successfully sells an average of 3 out of 4 businesses we take to market. We are only too aware of the key reasons businesses fail to sell, and so we work with the business owners to ensure their business is fully prepared and in a position to realise it’s maximum value before we take it to market.

There are 4 main reasons that businesses fail to sell:

In the first article of this series we focused on the importance of having professional advice during the sale preparation period, to ensure that exit value is maximised.

In the second article we covered how poor financial information can affect the saleability of your business.

In the third article we explored how an over-reliance on the business owner(s) can considerably reduce the value of the business.

In this final part of the series we will look at the impact of unrealistic price expectations.

Overvaluing the business

Having a clear understanding of what a business owner wants and needs their sale to achieve is a fundamental part of exit planning, but what could happen if the seller is overestimating the true value of their business? 

The seller is likely to have an expectation of what they think their business sale will achieve, and will be looking for this to fund their lifestyle post-sale. However, without an independent valuation, their expectations may be well out of line with the market. They could find that they are overvaluing their business based on their own personal aspirations and their emotional attachment to the business.

If the business owner’s ideas around likely valuation are not grounded in reality, then it could severely reduce the chances of attracting the right buyers – delaying, or even preventing, sale from reaching a successful completion.

If the price is too high, prospective buyers are unlikely to take it seriously and investigate the opportunity further.

Industry experts will be able to make an assessment based on sector, proposition, profitability, owner reliance and client base to provide a clearer picture on the likely value a business could achieve when it goes to market. If the business is valued within the right range, then the chances of attracting the right buyers with fair and sensible offers is greatly increased.

The simplest way to start the process is with an online valuation – we provide a free online report (26 pages) available at https://www.evolutioncbs.co.uk/free-valuation; it takes about 20 minutes to complete and provides useful measures of the overall financial and operational health of your business.

 

Prepare your business for sale at one of our free events

Join us at one of our free events and hear from our panel of industry experts. Discover how to generate maximum value from a future sale; as well as gaining insight in to the legal, financial and commercial aspects of selling a business.  Details of all events are available on our website – www.evolutioncbs.co.uk/events.

 

 

EvolutionCBS is one of the UK’s leading providers of Merger & Acquisition Advisory Services.

As experts in the creation, management and successful delivery of tailored business sale campaigns, our team pride themselves on providing a highly effective service that successfully sells an average of 73% of businesses taken to market – 3x the industry average.

EvolutionCBS has, collectively, been responsible for over 500 successful transactions with an overall value in excess of £2bn.

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