Issues That Can Make A Business Difficult To Sell

1. Business is overpriced.
• How was the price determined? The business should be priced using the three most common methods: Capitalization Method, Basic Method, and the Comparable Sales Method.
• The owner should know how to apply these methods to price the business.
  
  
2. Cannot be financed.
• Record keeping is very important in getting the transaction financed. The Small Business Administration (S.B.A.) requires three years of tax returns that support the new owner's salary and can service the debt of the loan.
• The S.B.A. will not finance a transaction using profit and loss statements vs. tax returns.
• Who will be financing the transaction if not the S.B.A? One source would be an all cash buyer. Another source would be owner financing. In a high percent of transactions, the owner will have to finance requiring a buyer to put 30-40% down. This tells the buyer that the seller is confident the business will service the debt.
  
  
3. Presentation and packaging.
• Was the business professionally packaged to answer all basic questions and show the future opportunity? The package must get the buyer to start brainstorming the opportunity, not just focus on the numbers.
• Buyer has several questions to determine if the business is the right one.
• Why is the business being sold?
• The number of years the business has been in existence?
• The number of years the current owner has had the business?
• Competition - How many competitors are in the local market?
• Risk - Is the business itself risky? Barriers to entry, liabilities to owner,   contracts with customers and the employees needed to succeed?
• Growth of the business - Is the sales trend up or down? How has it been over the past two years?
• Location - Is it the right place for its type? Is it in a safe part of the city? Is parking acceptable?
• Desirability - How popular is the business? Does it have a good appeal or would it only appeal to a few buyers
  
  
4. Timing of the sale
   • A business that is priced using the three common methods, packaged professionally and is being financed by a bank or by the owner should sell in four to six months.
     

Keep in mind - Most buyers look to leverage their money. They will compare your business to other opportunities on the market.