Reasons Why Sales Derail, Part 1

At Utah Business Consultants, we’re here to ensure your business exit planning and sale processes go smoothly. We’ve seen a number of mistakes made by various parties while selling a business during our years in the field, and our business brokers are here to help you avoid all these while getting maximum value for your business – all without a major hassle or time constraint.

When the sale of a business breaks down or fails to close properly, there are a few different parties or root causes that might be at fault. Today, we’ll begin a two-part blog on this subject by looking at the two most common parties involved here: The seller of a business and the buyer.

Seller Factors

There are a number of mistakes a seller can make during the process that might derail a sale, many of which can be avoided simply by having brokers like ours available to help you out. Here are a few of the most common:

  • “Testing the waters”: In some cases, sellers aren’t entirely serious about selling the business to begin with. They may not have a great reason for entering the process to start with, which will lead to a lack of willingness to negotiate. They may also simply be testing the waters, so to speak, and trying to determine whether prospective buyers will pay a certain price range. Business sales are complex and require a full commitment to get done properly.
  • Lack of honesty: One big mistake a potential seller can make, and one that could have legal ramifications in some cases, is being dishonest about any part of the business or the sale situation. Some may try to hide income or debt issues from buyers, or may not disclose important details like multiple owners or new competition entering the marketplace.
  • Unrealistic price: Many sellers do earnestly want to sell, but they’re totally unrealistic about the price they’re asking. The marketplace defines the demand for your business, so if offers aren’t coming close to the valuation you’re placing on your business, you may have to reconsider it.
  • Changes: Some sellers wait until finding a buyer before checking with tax and legal advisors about the basics of the sale – this can cause deal terms to be altered, and the buyer may not stick with the deal at this point.

Buyer Factors

  • No urgency: Buyers have different wants and needs, and they may begin a negotiation with good intentions but realize as things progress that they aren’t as interested. This isn’t really an element of “fault” per se – many sales just don’t work out for basic reasons like this.
  • Commitment: Buying a business takes time and commitment, just like selling one. Some buyers simply aren’t prepared to do that work, or don’t care enough about the potential acquisition to do so.
  • Expectations: Buyers can be unrealistic about things like prices and details, just like sellers can. Many may not be educated on the ins and outs of small business operations or valuations.

For more on the factors that can derail a business sale, or to learn about any of our exit planning or business valuation services, speak to the staff at Utah Business Consultants today.

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