The Top 3 Reasons Why Business Sales Don’t Close
Selling a Business or Buying a Business is a Complicated Process.
Many things can get in the way of a successful business sale and purchase.
Here are 3 of the most common reasons why business sales don’t close.
By understanding what these common pitfalls are, business buyers, business sellers and business brokers can work to prevent these obstacles from getting in the way of a successful business transaction.
1. Seller Issues
A seller can get in the way of selling their business in several ways.
First, a seller may lack a strong reason or motivation to sell. If this is the case, the seller is normally inflexible during negotiations. As a result, during negotiations, the seller often doesn’t have the patience, energy or commitment to selling their business and have little interest in working to overcome the common sticking points of business sale negotiations.
Another common issue with sellers is the value that they attach to their business.
Sometimes the sellers perception of the value of their business is not reflected in the financial performance of their business, or in the marketplace when compared to businesses that have sold recently in the same industry and in a similar geographic region.
Another common issue that arises with sellers is that they are not fully transparent with the potential buyer.
For example, the seller may not be disclosing a serious problem with the business, or in the industry that the business operates in. When a buyer performs standard due diligence, these hidden concerns are uncovered and the buyer loses confidence in the purchase of the business and a level of trust is broken with the seller.
2. Buyer Issues
Just like circumstances surrounding the seller may interfere with the sale of a business, the same is true for buyers.
In some cases, the buyer is only somewhat interested in being a business owner. As a result, the buyer doesn't have the wherewithal to continue on and navigate the complexities that can arise during the process of buying a business.
When it comes to price, buyers may have unrealistic expectations as well. Some buyers are simply not willing to pay the fair market value for a business.
The financial resources of a buyer can often prevent a successful business transaction.
If the buyer doesn't have sufficient financial resources, or access to third party financing, it can be difficult for a buyer to pay the fair market price of a business.
3. Third Party Issues
In some instances, there is no issue regarding the buyer or seller.
Instead, it is a third party that prevents a business deal from closing.
An example of this would be a landlord who is unwilling to transfer a lease or grant a new lease.
Another third party issue could be unexpected issues with regulatory compliance, transfer of certain rights and licenses, franchise agreements, etc.
Conclusion
Business deals can be complex affairs with many factors impeding a successful business transaction.
The good news is that if potential problems are handled correctly by an experienced business broker, at the right time, most business deals will reach a successful conclusion.
STONEBRIDGE Business Brokers of BC are specialists when it comes to resolving and circumventing potential issues with the sale and purchase of a business in BC.
If you are interested in selling a business in BC or Vancouver we can help.
Or, if you would like to buy a business in BC we can help you find the right business.
Contact Us Today for a Free Consultation at: stonebridge@businessbrokerbc.ca
very insightful information, thank you.