Overview of How to Sell a Business
In the last issue (#1) we provided an Overview of Newsletters Series. Before going any further you should be aware of these Amazingly Poor Business Sale Statistics.
"Failure to prepare is preparing to fail." John Wooden
Amazingly Poor Business Sale Statistics
Tom West is the guru of the business brokerage world and the author of industry books including Business Reference Guide and The Complete Guide to Business Brokerage. He is also the co-editor of the Handbook Of Business Valuation and Mergers & Acquisitions Handbook of Small & Midsize Companies.
In his 15th edition of The Business Reference Guide, Tom West attempted to answer the question: What percentage of businesses are ultimately sold? Because business sales are private transactions, Tom acknowledges it is an impossible task, but he goes on to provide an educated guess.
It's shocking! Only about 25% of businesses ever sell!
Estimated percentages of businesses sold by business size
Tom categorized companies into the following groups:
Level One
Sales under $500,000 and fewer than 4 employees. Tom estimated that only 20% of these businesses will ultimately be sold.
Level two
Sales of $500,000 – $1,000,000 and 5 – 9 employees. Again, Tom estimated that only 20% of these businesses will ultimately be sold.
Level three
Sales of $2,500,000 – $10,000,000 and 20 – 100 employees. Better yet, but not great. Tom estimated that only 33% of these businesses will ultimately be sold.
Level Four
Sales under $500,000 and fewer than 4 employees. Tom estimated that only 20% of these businesses will ultimately be sold.
Are Those Amazingly Poor Statistics Believable?
You may be saying: “Wow! Those statistics can’t be true.” When I started in the business brokerage industry, those were my thoughts: “No way, no how!”
But, after twelve years of business brokerage, I am in complete agreement with Tom’s estimate. My personal experience has proven that most business owners fail to properly plan for the sale of their business. There are so many potential obstacles to a successful sale that planning is a must. If you fail to identify the obstacles, you cannot overcome them. If you do not plan in advance, and then one day decide it is time to sell, chances are your business will not be saleable, or is only saleable at a value that is far less than it might have been with some forward planning.
"All personal achievement starts in the mind of the individual. Your personal achievement starts in your mind. The first step is to know exactly what your problem, goal or desire is." W. Clement Stone
Overcome the Power of Inertia
Overcome the Power of Inertia and call a business broker for a free consultation. Many brokers offer no-charge, no-obligation evaluations of small businesses. They can provide a broker opinion of value and help you identify obstacles to a successful sale as well as opportunities for improvement to increase the value of your business. That is a great way to start planning for a successful and profitable exit from your business.
