Starting and running a business is a challenging and rewarding endeavour, but achieving the price you want when it comes time to sell can be difficult. Whether you’re looking to sell your business outright or take on a partner, there are several reasons why you may not get the price you’re hoping for.
Here are five reasons why you may not get the price you want for your business.
1. Lack of financial records
One of the most important factors buyers look at when evaluating a business is its financial performance. If your financial records are accurate and up-to-date, it will be far easier for buyers to assess the value of your business and build trust. If they are, it will be easier to get the price you want, as buyers may be hesitant to offer a premium price if they don’t have a clear picture of the business’s financial health.
2. Poor market conditions
Poor market conditions are another reason you may not get the price you want for your business. If the economy is in a recession or even nearing a recession, it will almost certainly spin negativity in the media. Another market challenge is a high level of competition in your industry. These factors can reduce the market’s price for your business due to uncertainty or strong selling competition.
3. Lack of growth potential
A third reason you may not get the price you want for your business is a lack of growth potential. If your business is not growing or is in a mature industry with little room for expansion, buyers may not be willing to pay a premium price. They may see the business as a “cash cow” that generates a steady income but has little potential for growth and expansion.
4. Legal, regulatory or development issues
A fourth reason you may not get the price you want for your business can be due to lengthy, ongoing legal disputes or nearby construction. No buyer wants to absorb someone else’s headache. If your business has unresolved legal conflicts or needs to comply with relevant regulations, it can be challenging to get a great price. Buyers may be hesitant to take on a business with unresolved legal issues and may offer a lower price.
5. Personal reasons
The last reason you may not get the price you want for your business is personal reasons. This can be broken up into two areas. Firstly, it is essential to understand that your business may be a personal passion, but it is a financial investment for buyers. Sometimes, sellers may have unrealistic expectations of what their business is worth and tie unrelated factors to its value. For example, it’s been operating for over 20 years. Plenty of businesses go broke after 20 years. A long-established business is nice, but it doesn’t mean much if profits are low. This can make finding a buyer willing to pay the price challenging. Secondly, the seller might be trying to get a certain amount to cover debts they and the business owe. The market has no intention of arriving at a sale price based on someone else’s debt, only what they are willing to pay.
In conclusion, selling a business can be a challenging process. While there is no guarantee that you’ll get the price you want for your business, understanding why you may not get that price can help you prepare and make informed decisions. In addition, by addressing potential issues and being realistic about the value of your business, you’ll be in a better position to negotiate a fair price and find a buyer willing to pay it.
If you want to know more about what’s involved with selling your business, then get in touch with the details below.
I help my clients successfully exit their business at the highest price, in good time, and without stress.
Next Steps
If you want to know more about what’s involved with selling your business, then get in touch with the details below.
- Call on 0416638154
- Email at mick@mickgodwin.com.au
- Booking a Strategy Call in my calendar.
