Chicago Business Broker | Playbook Advisory
M&A Experts - Your Trusted Advisors
financials numbers 1.jpeg

Blog | Resources for Business Owners | Buyers & Sellers

Latest News, Posts & Sales from Playbook Advisory. Chicago’s leading business brokerage firm.

Business Broker News & Updates

Man selling business image business broker
rss Block
Select a Blog Page to create an RSS feed link. Learn more

Your Business isn't Selling...Now What?

“I have a good business, it should have sold right away, what can I do to make it happen?"

Every business broker has listings that can’t seem to get a qualified and motivated buyer to purchase the business. This article addresses issues for those businesses that aren’t selling and suggestions on what you can do.

First, have you identified an issue or even many reasons the business isn’t selling? What feedback are the buyers giving your business broker? If you aren’t hearing of any than you need to address it with your professional because they should be hearing directly from buyers about why they aren’t interested.

Common issues we see are pricing (relative to cash flow) where the business is listed too high as a multiple of cash flow, too high of customer concentration (We’ve seen up to 80-100%), too high of working capital necessary to run business, cash flow too low (Under $100k a year), lack of key employees and messy facilities.

  • In this post we will address 5 issues with some suggestions on how to handle the problem;

  1. Customer Concentration -

This specific issue is really common, bank don’t like it and buyers always want to knock down the price of a business because of the risk of losing one customer changes the value of the business tremendously. In my experience, the relationship is usually very strong with the Seller and there are good reasons for the buyer to retain this relationship. If you are the owner, ask the client for a contract that can be open ended or is for 2-3 years in length. If this isn’t an option, than look to structure contingent payments with the Buyer post-closing. Or negotiate an employment agreement that carves out this relationship and you the Seller help manage it for a time period after closing.

Other Possible Solutions

A) Offer the Buyer heavy seller financing & an earn-out structure, or future royalty payments

B) Sell to a larger strategic competitor that dilutes the concentration risk

2. Declining Sales

Another tough issue to deal with for a Seller and Business Broker. How significant is the decline? 1-5% is different than losing a top 5 customer and seeing declines of 15-20%. Banks don’t like declines and Buyers aren’t able to always determine if there is added risk. Sellers should assess the reasons for the decline prior to going to market. Can the issue be remedied? If yes, read on, if no, go to the end of this article for final recommendations

Other Possible Solutions

A) Offer heavy seller financing & earn-out, royalty payments

B) Sell to larger strategic competitor

C) Delay selling and make investment in sales & marketing. **

3. Older Staff Members Near Retirement

I recently had this issue as the Company’s employee census uncovered an experienced staff, but also the majority of employees close or beyond the age of normal retirement. One of the staff members was in their 80’s. Of all the issues for a business this one can be properly managed with the help of a strong training and transition agreement with the Seller.

Possible Solution:

A) Offer Buyer an extended training & transition

4. Real Estate -

When the property is worth more than the Current Business Can Afford to Pay**-This one is so common here in my hometown of Chicago, IL. Almost every week I come across a business that has free and clear real estate with no mortgages and the financials show a business with below market facility costs. Due to the complexity, of this issue I strongly recommend Business Owners speak to an experienced real estate professional to best determine the plan of dealing with this prior to listing the company for sale.

Other Possible Solutions

A) Offer Buyer a rent structure that has below market rent for a period of time (Note: Beware of SBA Requirements)

B) Lease Option Structure

C) Credit to Buyer to move the business & equipment

5. Weak Company Financials-

No business owner should attempt to sell with messy or incomplete financials. You either never sell or end up financing a buyer who will only underpay to offset their risk.

Other Possible Solutions

A) Get professional help- ask your business broker for CPA referral or bookkeeper to take over this job.

B) Switch accountants - Pay for an upgrade of the books and have a CPA complete monthly or quarterlies for you.

If none of the above are issues for your business perhaps the main problem is the business broker who you hired to sell the business. Perhaps their experience level isn’t high enough or they are not spending the money for marketing. The marketing and listing of a business for sale can be very complex as there are a number of issues that can come up during the sale process. It really helps to have someone on your side who has closed enough transactions to assist when problems come up. Negotiating and handling buyers who most likely have never bought a business before is an animal in its self. There can be swings in moods as the buyer deals with spouses, friends and neighbors weighing in with their “recommendations.”

Get someone who you trust can see the sale go all the way to the finish line.

Possible Solution

A) Go to Bizbuysell or Bizquest and click on the Broker’s link. Go ahead and contact 3 business brokers to discuss why your listing did not sell.

Listen to their recommendations.