The unfortunate truth is that approximately 50 percent of all small to mid-sized business for sale transactions fall through. Failed transactions can happen for a variety of reasons, i.e. the owner/seller has poor record keeping abilities, the business location has an unattractive lease, and even a lack of motivation for the owner to get a deal done, etc. While many of those reasons have led to failed deals, the most common reason that deals fall through is because the seller has listed their initial asking price much too high or the deal terms just don't pencil out.
When a business owner lists their small business for a price that seems otherwise unreasonable to potential buyers, it ultimately scares off the majority of those buyers who were genuinely interested in buying the business. Business owners who have invested a lot of time and money into their company want to get top dollar for their hard work, even if it means valuing their business where they believe future profits would have taken them, or in the ballpark of what their business was worth before recessions or downturns in the economy.
If a business owner has their business priced too high and begins negotiations with a potential buyer who is willing to buy the company for much less than the listed price, it is important to keep an open mind and work toward understanding why people aren't willing to pay the full asking price for their business.
As a seller, you may have come to your asking price without having your business properly valued/appraised (such as utilizing a business valuation professional and/or the BizBen.com database of pre and post sale comps), and may need to reevaluate your stance on your asking price (and deal structure) and seek professional assistance. This is critical since the first thirty to forty five days of a business being on the market to sell is the most important time period to get things (valuations) right!
As a potential business buyer, it is critical to be able to support your value of the business you are interested in purchasing with hard facts. Analyzing a profit and loss income statements and business tax returns from the previous 3 years is an excellent place to start and is among the numerous things that will play into the process of valuing the business - but there are other documents and information that you'll need to really determine what the small business is truly "worth".
After an offer is made, both parties must work together to understand where the other side is coming from and that everything is negotiable. If you aren't willing to budge or negotiate, you'll never get a deal done. Both parties (sellers and buyers) should develop a rapport with one another to show good faith and support their reasoning for prices in a way that doesn't scare the other party out of a deal. Neither party should become excitable or get offended by the other person's offer/LOI/purchase agreement, but rather strive to make a deal that benefits both sides based on supporting documents and information.
About the Author: Peter Siegel, MBA is the Founder & Lead Advisor at BizBen.com (established over 25 years - with thousands of small businesses for sale & wanted to buy postings - over 500 new & refreshed posts & postings daily). BizBen.com offers business buyers, owner sellers, business brokers and advisors free access to online postings, articles, blog posts, discussions, podcast, resource and broker directories, etc. Peter heads up the BizBen.com ProBuy, ProSell, & ProIntermediary Programs. Peter Siegel, MBA can be reached direct at 925-785-3118.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Shalonda Chappel: Escrow & Bulk Sale Services - Southern California
Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.
|William F. Ziprick, Attorney: Legal Services For Buyers And Sellers
Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.
|Elizabeth McGovern: Escrow Services - San Francisco Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Brad Steinberg, Business Broker: Laundromat Specialist
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
|Diane Boudreau-Tschetter: Escrow & Bulk Sale Services In California
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Helen Yoo, New Century Escrow - Escrow Services In Southern California
Helen Yoo at New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
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