When You’re Ready to Sell, But You’re Business Isn’t

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Back in 2019 someone came into our offices wanting to sell. We did an informal valuation and told him we thought the business could get $575,000 on the market. He demurred, stating he needed $1M. We told him what he needed to do, which included working less in the business and more on the business. If he did, we could attain something closer to that value in a few years.

He kept checking in with us each year, all the while implementing the advice we gave him. We kept giving him better numbers as we observed those changes. Sure enough, four years later, we listed the business for $950,000 (and it sold).

We wish we could say how that always goes, but more often than not what happens is that someone comes in to tell us, “I need to sell now.” We walk through numbers and explain that the business is not ready to sell at the moment, at least not for the desired price, and that some time, from as short as nine months to as long as a few years, will be needed to get the business ready to sell. You being ready to sell doesn’t carry over to the business. The business has to be ready too.

When we tell this to people in this situation, they can get upset. But it’s not personal. In fact, we’d love to take a listing because there’s a chance for us to work and get paid. But we have to turn down far more listings than we accept. Accepting a listing means we believe:

• The business will sell. Brokers spend hundreds of hours on each successful transaction (and sometimes on the unsuccessful ones too). We’re not interested in taking on a listing if we don’t think the market is interested.
• Our buyers would be interested. Each of our brokers maintains a curated list of qualified buyers and we work as a team here so that all of those buyers find out when one of our brokers lists a business. We’re always learning new things and selling new kinds of businesses and while some buyers are only interested in a specific type of business or industry, many of them are interested in any solid business.
• The deal will be bankable. The majority of our clients at Apex are people who are using SBA financing to close the deal. There are clear criteria for SBA loans, (or any loan), including clean financials and current tax returns.

One more thing to keep in mind. What you may be willing to do is not necessarily what a buyer would be willing to do. Consider the seller phrase (which we have heard before), “I make $150k a year and I work 65 hours a week.”

Would a buyer be willing to work 65 hours a week?

Would someone who isn’t a subject matter expert or familiar with the industry be able to get away with only 65 hours a week?

How many ready and willing buyers have on their wish list, “Must work at least 65 hours a week when I buy a business.”?

You may be ready to sell, for various reasons. But make sure you have a business that’s ready to sell. And if it isn’t, have the humility to dig in one last time to get it ready so you can cash out on all your hard work.

Not sure what your business is even worth? Give us a call and let’s figure it out together.