How to chase away most buyers, and get the lowest possible sale price for your business.
Bad record keeping. If your books are a total mess, or your financials are total BS? People aren’t stupid. That’s not going to work. Nobody wants to take on a HUGE liability with the tax man. ***I was working with a business owner that had a very profitable water business. But, the financials showed a $180,000 Miscellaneous expense. That was about 30% of their gross revenue. And they couldn’t explain it. It scared me and I walked from the deal.**
Exaggerated owner perks: You claim your business pays for your car, phones, exotic vacations, several homes, and hookers?? You’d better have clear and detailed receipts for every cent that you’re claiming as an owner benefit.
Claim extra off-the-books income (cash only): No buyer will even consider the “secret cash flow” in their calculations. It’s also a warning sign of fraudulent, improper or even illegal activity. If your business actually has extra cash income, we’re going to address it in a later chapter.
Weird financial performance: Once a business is established, it develops a certain level of inertia. So, year over year, it’s mostly steady with movement up or down. But if each year is completely different, with sales and expense numbers all over the place? That’s a big red flag to a major business problem that hasn’t been solved.
Sales trending down: This is a red flag to a business circling the toilet. Is the management incompetent? Is the product stale?
No sales force: The business is relying too much on existing customers, and/or the time and energy of the owner.
A few large customers: If any customer is more than 20% of your sales, you’re in deep trouble. The loss of a major account can move you from a profitable business to an unprofitable one. (One of my companies won a major contract with a HUGE organization. That account was 80% of our sales for almost 5 years. It was nice while it lasted, but when they moved on, the business was DONE.)
No business or marketing plans: You have to know where you’re going, and your buyer needs to see that you’ve been forward thinking in your operations and business decisions.
Bad, or weak employees: To many businesspeople keep mediocre people, or fail to supervise and train. A buyer wants a strong team that can do the work for them.
First Impressions: At first glance? How does your business look? Does your location smell funny? We cover this in a later chapter.
Bad locations: Does your location suck? Are you hidden from view? Do you have parking? Signage? Good access to supplies/ trucks etc??
Reason for selling: A very common question. If you’re vague, or the reason doesn’t make sense, the buyer is going to run away. I’ve seen situations where the seller changes his story during a conversation.
Are you being a lazy, uncooperative jerk: If you want to sell your business, you’re going to have to be motivated. It’s a lot of work for the buyer and for you. If you’re not willing to jump in and be open and helpful, the buyer is going to walk. Being an arrogant jerk is not a negotiation tactic.