Synopses of Numbers 12 - 22 of 66 Obstacles to a Successful Business Sale
In the last issue (#24), we provided brief Synopses of Numbers 1 – 11 of 66 Obstacles to a Successful Business Sale. This issue will give short Synopses of Numbers 12 – 22 of 66 Obstacles to a Successful Business Sale.
"We are all faced with a series of great opportunities brilliantly disguised as unsolvable problems." John W. Gardner
Synopses of Numbers 12 - 22 of 66 Obstacles to a Successful Business Sale
To view the complete list of 66 obstacles, click on this article: Issue #23 – 66 Obstacles to a Successful Business Sale.
Following are brief summaries of obstacles 12 – 22:
12) Customer Concentration Issues
If 10-15% of your revenues are derived from one customer or 25-30% are derived from two or three customers, you might have a customer concentration issue. This affects a buyer’s perception of the business and the ability for a buyer to obtain lender financing. Read more in this article: Issue #68 – Customer Concentration Issues.
13) Asset Value too High vs. Return on Investment
Asset-laden businesses sometimes have asset values in excess of the value of the business based on its earnings. Unfortunately, you won’t be paid based on earnings plus the value of the assets. It’s one or the other, and this situation can create a significant obstacle. Read more in this article: Issue #69 – Asset Value too High vs. Return on Investment.
14) Real Estate Value too High vs. Return on Investment
When a business owner also owns the real estate occupied by the business and the real estate value is substantially higher than that of the business, it may result in a detrimental effect on the salability of the business. Read more in this article: Issue #70 – Real Estate Value too High vs. Return on Investment.
15) Large Working Capital Requirements
Three factors have an impact on working capital needs: 1) long collection periods on accounts receivable; (2) inflexible payment terms from vendors/suppliers; and 3) the need to carry large amounts of inventory. Large working capital requirements detrimentally affect the value of a business and sometimes create a major obstacle for buyers. Read more in this article: Issue #71 – Large Working Capital Requirements.
16) Excessive Personal Expenses and Skimming Cash
Owners who run excessive personal expenses through their business and /or do not report cash transactions end up understating their true business earnings. Since business valuations are based on earnings, it’s best to eliminate these practices at least three years before selling your business. Read more in this article: Issue #72 – Excessive Personal Expenses and Skimming Cash.
