This article are provided for information purposes only, and are not intended as legal advice.


problems selling a business

August 1st, 2008

Are you having troubles trying to sell your business – is the price too high?  are you in an industry which is being affected by external events detrimental to your business? For example high gas prices are affecting car sales which in turn affect all companies related to the automotive industry.  This affects trucking companies, CNC shops and many more.

 

Do you need to market to a competitor?  How do you give information to a competitor without revealing too much information about yourself?  You never should reveal your customer list at the beginning of your negotiations.  You may want to have a middleman/broker talk to your competitor because your company name will not be identified.  Purchasers can use information about your business for their own interest.  By telling customers you are for sale, customers may be concerned your stability and not provide you the business.  Often you can get a much higher price from selling to a competitor however you must proceed carefully in order to ensure confidentiality is maintained for the present and in the future in case your negotations do not succeed.


Filed under: Sell a business — Gary Landa @ 2:41 pm


2 Comments »


  1. There are many people looking to acquire a business these days but they are being very selective.

    There are different price points that must be considered when building a business that you are about to sell. If the purchase price is in the $100,000 to $200,000, an individual may have equity in their home and may be able to place a mortgage on their home in order to buy the business. If the price range is between $300,000 and $1 million, the buyer may not have enough equity in his or her home or sufficient assets to use as collateral to buy the business. In my mind, this is a very difficult price point for a business. It is too big for the small person and too small for a large company.

    When building a business which you know you are going to sell, you can decide to build it and possibly get a higher price. But will the higher price put the purchase price into a range which is difficult to finance? Sellers do not realize that there is an opportunity cost. if you are selling for example a retail store and the selling price is $700,000, if the bank will not lend the buyer any money, then the buyer must come up with $700,000 in cash. However, if he had $700,000 in cash, he could buy a manufacturing company making 3 times the profit of the retail store. Sellers think that the buyer is getting a great deal but they never think about what other businesses that a person could buy with the same amount of equity.

    When I mentioned before the $300,000 to $1 million dollar price point, this in my mind is a price point which the buyer looks for what else can he do with the same amount of equity. As a result, those businesses, in this price range, which must be purchased for 100% cash are difficult to sell because the buyers can borrow money from a bank for a business which has assets which they can leverage with teh bank. For example, a bank often will use the hard assets of a manufacturing company to support a loan but will not lend using the inventory of a retail store.

    Comment by admin — August 16, 2008 @ 9:41 am

  2. Good post. I am looking into these issues on my blog….

    Trackback by automotive business franchise opportunity — November 3, 2008 @ 2:06 am


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