What are the odds of your business actually selling once you’ve decided to sell?

If your business’ annual sales are $750,000 or less, research indicates that the odds of your business selling are only 18 percent. If your annual sales are $750,000 to $2 million, your odds increase to 25 percent. With annual sales above $2 million, the odds increase to more than 30 percent. Keep in mind that approximately 75 percent of all businesses have annual sales of less than $750,000.

Put bluntly: if you’re thinking of selling your business, you have about a one in five chance of it actually selling.

So, why are the odds so poor? Here are some reasons why some businesses don’t sell–as explained by various business brokers and intermediaries. They’re excerpted from an article in Inc. magazine, April 2002:

• The business is no longer for sale. Cash flow was strong, but buyers thought the deal was overpriced.
• Buyers were intrigued, but the deal’s economics wouldn’t make sense, and the seller wouldn’t negotiate.
• There was serious interest, but the owner got distracted by an arrangement with a friend to solicit offers. None came through.
• We almost had a deal, but financing was impossible to find.
• We had three offers, including an accepted bid for $4 million, but the buyer couldn’t get financing.
• The deal dragged on for months but fell apart for lack of financing.

When selling, timing is everything. Many business owners wait until the economy is down, but sellers should keep in mind that the best time to sell is when their business is doing well.

One major factor that emerges from the comments by intermediaries above is the lack of financing. Three of the comments stated the reason deals didn’t go through was “financing was impossible to find,” “ the buyer couldn’t get financing,” and “...fell apart for lack of financing.”

Obtaining financing is difficult because (1) a business doesn’t qualify for financing, (2) the buyer doesn’t qualify for financing, and, most importantly, most small businesses aren’t financeable. Banks generally aren’t interested; the Small Business Administration, although certainly an option, is only involved in less than 10 percent of deals. If lenders aren’t interested in financing the sale of the business, only two choices exist: buyers pay all cash or thesellers finance the sale.

Want to increase your odds? Here are two major ways to increase the odds your business will be the one in five that sells:

• Make sure you’re serious before putting your business up for sale. You should be willing to accept, within reason, what the marketplace is willing to pay. Find out if your asking-price is in the “ballpark” before going to market. Your local business brokerage professional is a good place to start for such research.
• Be willing to finance the sale of your business. Counting on the business selling for all cash or assuming that the business can be financed will most likely make your business one of the four that don’t sell. And you reassure the buyer you have confidence in the business’ ability to finance itself.

These guidelines should serve to increase your selling odds. Almost any business will sell under the right circumstances.

Nancy Cofield,CBI, is president/broker with
Corporate Investment International of North Florida, Inc.
She can be reached at 996- 1666 or ncofield@cii-ma.com