Why Didn't My Business Sell?
I constantly tell Business Sellers that if you call enough Business Brokers, you will eventually find one who will tell you just what you want to hear.
What that means is that some Broker will tell you that they can bring a much higher number for your business than what you’ve heard from the other Brokers.
Then they go deaf, and don’t hear anything else other than “please sign right here, thanks”.
Now let’s fast forward 12 months. The Business Seller still has the keys to the front door of his business in one hand, and he’s looking at the expired listing agreement in his other hand. “Geez, why didn’t it sell?” And the Broker might not have even it shown more than twice!
I read an excellent article recently entitled, “If Your Business Broker Lies to You, it Might be a Good Thing – and Your Own Fault”, written by Mike Finger and originally published on November 27, 2018.
See the following brief excerpt from Mike’s article:
The Broker arrives and in the first 5 minutes of the conversation the owner nervously and energetically stresses 4 things they expect from a deal. They tell the Broker they demand:
o A minimum of a 5X earnings multiple for the business, (the Broker knows that for this type of business 2.5 is likely).
o To cash out entirely at closing, (the Broker knows this will dramatically decrease the chance of selling).
o To close the deal in the next 3-6 months, (the Broker knows that the average is 12-18 months).
o To have absolutely nothing to do with the business after they sell, (the Broker knows this will terrify potential buyers).
In my 15 years of experience, the typical response from the Listing Broker is “No problem, Mr. Business Seller, and please just sign here”.
However, a tenured and seasoned Broker will show up with sales comparables (“comps”) and discuss the realistic range that you should expect.
And if you’re finding that after interviewing a few Brokers that they are all coming up with the same numbers, you might have to adjust your financial expectations, to be in line with the reality of selling in today’s market.
Or, you can just keep calling more Brokers until you find the “yes man” that tells you what you want to hear.
And as mentioned earlier, 12 months later, you will still have the keys to the front door of the business in one hand, and an expired listing agreement in your other hand.
Geez, why didn’t it sell?
