Selling a Business with Declining Result
Sometimes the decision to sell a business is made for you, not by you. Selling a business when you have to (not want to) can be one of the most stressful experiences that an entrepreneur can go through.
Perhaps there is a family sickness, a personal matter or just plain bad economic conditions (like a recession in Canada) that force a sale under less than ideal circumstances.
Unfortunately, many business owners looking to sell their companies when results are down will need to think extra carefully about the strategy and how to best go about showcasing a declining business in the best possible light, while remaining honest. This article will examine a few things you can do if you really need to sell your business when it is not performing at optimum.
Work with a professional
While this might sound self-serving, working with a business broker is a very good idea if you are selling a business that is in decline. A business brokerage professional can help you identify buyers in the marketplace looking for a business that they feel they can ‘turn around’. Business brokers can also offer you suggestions to make your business more salable.
Is your business really a “going concern”?
If your business is suffering deep losses year after year, you need to determine if it really is a ‘going concern’. In other words, is there a future value to an owner in keeping the business in operation? Talk to your accountant about this. It is very difficult to sell a business that is not a going concern. Usually, if it is not, then a common valuation approach would be to value the company based on the liquidation value of the assets. This should be your last resort.
Is there anything that a new owner could do to improve the results?
This is a difficult question for many business owners to face. However, it is important to determine if there is a skill set that you as an owner are lacking (that a new owner may possess) that could potentially improve the prospects of the company. Perhaps an operator with a strong marketing background would be a great benefit. If this is the case, then this is something that must be identified – and showcased. A buyer who reasonably believes that they can turn things around by injecting a new skill into the operation may be an excellent prospect to buy a declining business for sale.
Have you bitten off more than you can chew?
Many business owners try to operate a business while they ‘keep their day job’ or perhaps even have another business that demands their attention. Oftentimes, this leads to a scenario where the business in question is not running at top capacity and could benefit from a hands-on owner/operator. If this is the reason for the business’s decline then perhaps you can demonstrate to a potential buyer the upside that exists if they ran the business with their full attention.
Selling a business is a challenge in the best of times. If your business is on the decline, work with a business broker to assist you through the process. It is critical that your business is priced properly and showcased appropriately to attract a buyer willing to purchase your business.
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