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


Selling a business – does size matter?

August 25th, 2009

When you are selling your business you need to determine who will be a potential buyer.  If your business is too small, large companies will not be interested in your business.  If you are too large for the small investor and too small for the large investor, who will buy your business?  The larger the business, the larger the purchaser, the more sophisticated the buyer is and the easier it is to sell your business.

 

If your business is too small, the chances are that you have never sold a business before. The buyer has probably never purchased a business before.  As a result, the seller or the business broker will have to educate both the buyer and seller of what to look for and how to proceed.  First time buyers are sometimes reluctant to buy a business and think that the next business will be cheaper and they may find something better in the future.  When someone is a first time buyer, they do not know what is for sale, they do not know what they want to buy, they do not know where they want to buy a business?  When you buy a house, first you decide on the area, then you look for a house within your price range.  Unfortunately in a business, many people want to buy something but they do not know what to buy or where to find that business.

 

Each business is different, every one has a different value.  Even though you can have two identical businesses in appearance, one may be more profitable than the other because of location, client mix, product pricing etc.  No two businesses will be worth the same.  You can see my previous blogs for discussions on this matter.

 

If you dealing with a sophisticated buyer, they will be able to analyze the financial statements and they will be willing to buy a business based on the financial statements and profitability of the company.  Small first time buyers of a business often buy based on emotion and not always using good business judgement.  If your business is too big for the small investor and too small for the larger investor, what do you do?  Can you split your company into two units and sell each unit.  For example, if you are a retail store with two locations, can you sell each location to a different buyer to get a better price and faster sale?  If you cannot split the company, should you expand the business and reinvest in the business so that you can get to the next level.  Do you buy a competitor, hire sales people from your competitor so that you can get to a size that you will attract a larger competitor?

 

There is a different buyer of a business for each type of business and size of business.  Size definitely matters!


Filed under: Sell a business — Gary Landa @ 3:58 pm


No Comments »


No comments yet.


RSS feed for comments on this post. TrackBack URL


Leave a comment


You must be logged in to post a comment.