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Selling A Business That Is Suffering

Selling A Business That Is Suffering

From time to time, we are contacted by business owners who say, “Sales are suffering, can I still sell my business?” This is a tricky question, because businesses are normally valued based on past and current performance, and if the business is showing a loss or just breaking even, then it realistically won’t be worth too much to a prospective buyer on the open market. However, if the business has tangible assets, it could very likely be sold for the value of its assets. So, even if sales are suffering, yes, you can still possibly sell your business, but it definitely depends on the situation and the circumstances. 

Sell Your Business To A Flipper

It can be difficult to sell a business that is not doing well financially. How many buyers want to invest in a business that is failing? The truth is, not very many. I’ve come across only a handful of investors and entrepreneurs who look for and prefer to acquire troubled businesses. They enjoy the challenge of “flipping” them into profitable businesses. This type of buyer has to be confident that they can do a better job than the current owner, and they have to be willing to put the hard work in to turn it around. It is possible to sell a company that is suffering to a “flipper,” but they are going to expect a great deal and are most likely looking for a rock-bottom purchase price, in order to minimize their risk and maximize their return. The best chance to sell your business to a flipper is to list it with a professional business broker, as we have the marketing that can reach these types of buyers. 

Selling Based on Asset Value

If a business is not doing well, and it has tangible assets that are desirable, then it is often possible to sell the business at the value of the assets. Most often, these sellable assets are things like equipment or vehicles. For example, a restaurant is losing money and sales keep declining. The restaurant owner invested $200,000 in brand-new kitchen equipment and furniture only a few years ago, and spent a large amount of money on the leasehold improvements as well. He has 3 years left on his lease, and he wants out, because he is losing money each month. In this scenario, the business owner could sell his entire business to a new buyer for the current market value of his kitchen equipment and furniture. A restaurateur looking to start his or her own restaurant might be interested in this opportunity, as they can assume the lease, and get all of the kitchen equipment, plus all of the furniture at a great package deal price. It would be much more expensive for them to start from scratch and buy all of the furniture and equipment piece by piece. The buildout of the restaurant has already been done as well, so it makes it an attractive option for a buyer to acquire and bring their own concept to life.  

Be Truthful About The Bottom Line

We have unfortunately been in the situation before where a seller wants to sell because their business is suffering, and they are not honest with us about the fact that it is failing. Trying to hide the fact that the business is suffering is never something that a seller should do. Being honest and transparent with your broker, as well as any potential buyers that come along is always the best course of action. If you share all of the facts with your broker, then they will be able to partner with you to sell your business for the best price possible in its current condition. If you are dishonest about your numbers, it will always come out during the Due Diligence process, and at that point, it is often too late to reverse the damage done by not disclosing the true picture of the business’s health. 

Don't Just Close The Doors 

Remember, just because your business is suffering, doesn’t mean that you can’t sell your business. Before you give up and just close the doors to your business, we'd like to share with you how to sell a business that is not at operating at peak performance. If you have questions about your specific situation, please give us a call. We always keep every conversation confidential, and we would be happy to assess your unique circumstances, to let you know what we think your options are. If we can help you, we would appreciate the opportunity to do so.

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