10 Reasons Why You May Not Be Able to Sell Your Business

Many business owners that I speak to don’t really understand what is involved with selling a business. And how could they when most have never sold a business before? We are vulnerable when we don’t know what we don’t know! Happily, there is help available for business owners to plug that knowledge and experience gap.

First, what are 10 reasons why you may not be able to sell your business? The 10 reasons listed below are not an exhaustive list – there are other reasons that can also play a part. However, the 10 selected are based on the most common ones I am seeing as I speak to business owners who would like to sell their business. These are:

1.????? Lack of knowledge / understanding about how to sell a business. Yes, how do you go about selling a business? Many business owners are unclear – they may know some of the possible routes to sale but still be uncertain on either which route to take or whether another unknown to them route may be best.

2.????? Unrealistic valuation expectations. How do you value a business and who determines the value? There are a number of ways to value a business but ultimately the buyer will have a large say in the valuation as it is what it is worth to them / the optimum price that they think they can get a deal at. Some business owners have built a castle in the air around valuation and they would benefit from independent advice on how to value their business. I had my business professionally valued four years before I sold it. This helped me understand what a buyer would be looking at and then gave me time to take actions designed to increase the attractiveness and valuation of the business.

3.????? Overreliance on the business owner. The skills, tenaciousness and attention to detail that are needed to start and scale a business may work against you when it comes to a business sale. How so? I am seeing businesses where the owners make all of the key decisions and also many of the minor, inconsequential decisions. The same owners also led on business development and own all the main client relationships. A buyer’s concern will be that when you take the owner out of the equation, everything collapses like a house of cards or Jenga tower. Buyers generally want to see a business that can operate well without the owner needing to have material involvement.

4.????? Financials not properly stacking up. This is an issue for many businesses … and in many different ways. For example: lack of profitability; lack of monthly management accounts; owner thinking the business is highly profitable but once their drawings are taken out as dividends (in many cases this is effectively their salary), there is too little profit to make it attractive to many buyers; turnover is low (there is a market for sub ￡1 million turnover businesses, but usually a smaller pool of buyers and usually lower valuation multiples); debt can be a concern and many buyers would want to see this paid off prior to a sale; late customer payments / delays / disputes may also put off buyers. Buyers also tend to want to see clear evidence of recurring revenues – either customers on contracts or high levels of repeat business (in my AM Bid business, 80% of our monthly revenues were generated by returning clients).

5.????? Lack of systems and processes. A business without operating procedures where custom and practice all exist in the owner’s (and a few long-serving staff members’) heads is not attractive. Instead, a business that operates to well-documented processes and that uses appropriate software systems means that it will be easier to run or incorporate into the buyer’s business post-sale.

6.????? Limited customer base. I was speaking to a business owner recently who had great turnover and net profit figures but 80% of it came from a single client. When I expressed concern about this, I was told not to worry as there had been a 10-year relationship. However, there was no written contract, so I had to point out how vulnerable their business actually was. They needed to urgently focus on growing their client base.

7.????? Technological advances. Artificial Intelligence (AI), Robotics, Machine Learning and other technologies are changing the landscape in many sectors. Businesses that have failed to keep up with technology are vulnerable in a number of different ways. Buyers will be looking at the next 3-10 years with as much (or more likely, greater) interest than the history of the business to date.

8.????? A poorly designed website. Your website is your shop window and somewhere that potential buyers will look at in detail. Will it withstand this scrutiny? Some business websites I have been asked to look at recently were last updated in 2020 … one even last had serious work on it in 2010. Another risk here is that potential buyers don’t even find you … your business is in the equivalent of a dimly lit back street that few people ever visit.

9.????? Relying on a business broker who may not be fully motivated for your sale. I have spoken to some business owners who feel let down by a business broker who has taken their money (or is taking it on a monthly retainer) but not able to get them a buyer. I didn’t need a business broker to sell my business. Instead, I built a business and brand that acted like a magnet to potential buyers. Four organisations wanted to buy my business with three progressing to offer stage. I was able to take my pick! So, while utilising the service of a business broker can work for some business owners, many business owners are left disappointed. There are other ways you can sell your business!

10.? Due diligence failure. Some business sales fall through late in the day. This is often because the business owner has been inadequately prepared for due diligence and the level of rigour and scrutiny this brings. For example, my business was asked for nearly 600 documents at the due diligence stage. We were well-prepared in advance for this given our experience of procurement and preparing bids and tenders. Many companies will not be ready though and the due diligence process can throw up red flags for the potential buyer. Getting advice on this well in advance can help avoid a last-minute sale cancellation or a price chip (where the buyer will only purchase at a lower sale price).

So, what actions can business owners take to improve their sale prospects and avoid owning a business that they are unable to sell when they want to? One of the main reasons for my successful business sale was that I prepared to sell right from starting the business … even though I planned to sell in 8-10 years (I sold in 8 years 9 months). I accepted external assistance including from experienced Non-Executive Directors and mentors. Getting help and advice from people who have been on the journey before i.e. successfully started, scaled and sold a business will enhance both your business sale prospects and valuation price. This also helped me to maintain the focus of building a saleable business.

You can start your journey towards a business sale by booking a 30-minute free introductory Teams call with me to discuss your sale aspirations. You may then choose to proceed to an Initial Consultation, a 90-minute Teams meeting (cost ￡495 +VAT) where we can discuss actionable steps to help you move towards a successful business sale. I also have additional services which can help you – these include mentoring; negotiation assistance; due diligence readiness; and Non-Executive Director involvement, if desired. ?

Please contact me to book that 30-minute intro call:

[email protected]

There is also a lot of information on the Business Sale Basecamp website on this topic:

Business Sale Basecamp - Enabling you and your business to be sale ready