Top 5 – Deal Killers
From 2001 – 2010, our founder Scott Duke had 5 of his 11 companies fail to sell. This was his primary motivator for learning how to build transferability into a business and entering into the M&A industry.
When it comes to failed business sales, Scott is not alone. 80% of businesses that go to market never sell, or have to be liquidated.
Listed below are the top five reasons businesses fail to sell:
If a business’s normalized earnings are under $100,000 it creates challenges for a sale because there is not enough free cash flow to pay an owner’s salary and service the debt from financing a purchase.
In many instances, businesses are unsellable because the owner has tied their identity, social well-being, and life’s purpose to the creation and operation of the business.
Subconsciously, they feel if they sell the business a part of them is dying.
The subconscious thought of death prohibits the owner from signing the sale document and they walk away from their own successful sale agreement.
If an owner needs to work in a business more than 10 hours per week, it’s an indication of owner dependence.
Some owners can easily resolve this issue by delegating work to a GM. Others have difficulty transferring power and are forced to stay on for 2-3 years post-sale to train a new manager for the buyer.
In some cases, the owner’s skill set is not transferable, making the business unsellable.
If a single customer represents more than 15% of revenue, 90% of buyers will not move forward with the purchase as the riskiness of the business is deemed too high.
If a single customer represents more than 30% of revenue, the business is unsellable due to insolvency risk if the single customer were to be lost.
As investment banker Rob Slee states, “the company is one phone call away from oblivion.”
Supplier or Key Person Dependance
If the business is reliant on a single supplier that can’t be replaced, it may be unsellable.
If the business is reliant on a single employee’s knowledge or skillset it may be unsellable.
How to Win in Your Deal
Experienced, practiced, and equipped competitors win at any game.
And in the world of business sales and acquisition the most experienced players have an extremely unfair advantage.
When selling your most valuable asset, to ensure you are prepared to win you must:
- Know what your company is worth and why.
- Ensure your company will make it though an investor’s discovery and due diligence process.
- Prepare your business so it’s set up to be transferable.
- Hire an experienced team and tie their compensation to your wealth creation.
Brochure and Pricing
If you would like more detail on any of our products or services please download our brochure.
Our brochure details the cost of each product, outlines how each service is delivered and how it benefits our clients.
410 Cedar Street