While the goal of every business sale is to efficiently allow for the purchase of a business by one party from another, the reality is that this isn't always accomplished. There are a few reasons why business sales may not close successfully, or may fall through before they reach the finish line - and knowing them in advance helps with both awareness and avoidance of any such issues from your end.
At Utah Business Consultants, we assist clients around Salt Lake City and other parts of Utah with all their business sale needs, from exit planning and business valuation to marketing, negotiations, and diligence support among many other business brokerage services. Across this two-part blog series, we'll go over the four categories of "blockers" to business sales - and what can be done to avoid the controllable elements therein and facilitate a workable deal for all parties.
In many cases, the blockers to a successful business sale come primarily from the buyer side. These can include:
Unrealistic expectations: In some cases, buyers may have unrealistic expectations about a business sale before entering into the process. They may believe they can purchase a business for far less than is common in the market, or that they’ll be able to secure certain terms and conditions that are reasonable only in rare circumstances.
Poor financials/solvency: Another issue that frequently arises on the buyer side is that the buyer doesn't have sufficient funds available, either in terms of cash or credit, to make the purchase. The Buyer may not qualify for an SBA loan or other commercial loan, limiting their qualifications to acquire a business.
Inability to agree on terms: Even if a buyer is solvent and has realistic expectations for a business sale transaction, they may not be able to agree on terms with the seller. This can include items such as contingencies and non-compete clauses as well as other key elements of a business sale transaction.
The seller side of a business sale can present its own set of blockers, including:
Unreasonable demands: The seller may have certain expectations that are out of line with the market, including a higher sale price than is typical for the industry or other unreasonable demands in terms of buyer qualifications or timeline for closing.
Unrealistic timelines: The seller may also be overly optimistic about their business sale timeline, expecting to close quickly and without working through the various steps necessary to create an agreement that works for everyone.
Just testing the waters: Some sellers may just be testing the waters - exploring the possibility of a sale without having any real intention or urgency to close it. This leads to a lot of inefficiency and wasted effort on behalf of potential buyers, who could otherwise have devoted their resources to more productive opportunities.
No matter the circumstance, understanding these inhibitors ahead of time is key for both buyers and sellers to ensure that the business transaction process is as smooth and successful as possible. In the next part of this blog series, we’ll discuss other factors that may block business sales, plus how to steer clear of them.
At Utah Business Consultants, we specialize in representing business owners in Salt Lake City, Utah and other nearby areas with all their business sale needs. Contact us today to find out how we can help you with your business sale needs.