Three Reasons Most Retiring Business Owners Cannot Sell Their Business, and What You Can Do About It Now

Pew Research Center estimates there are 10,000 baby boomers retiring every day.  There are more than 4 million businesses in America owned by baby boomers, and according to Axial, 65-75% of these businesses will be “on the market” over the next 5 to 10 years.  Can you say glut?   I’ve heard many comments like “trillions of dollars will change hands in the next 10-20 years.”  But I’m not buying that hype for I believe most of these baby boomer-owned businesses will not be sold. Those businesses will be closed or just given away.

Why?

Not a week goes by that I don’t get a call from a business owner who is ready to sell their business and start retirement.  Within 60 seconds, I can identify one of the reasons the business is not likely to sell.

Over-priced business

Business valuation is a mystery to most business owners, but what they want for their business is not.  Most retiring business owners have derived the “value” of their business relative to how much they want for retirement.  Here’s how this happens… the business owner calls a capable and honest business broker/M&A advisor who explains how business values are determined.  The business owner then applies those standards to his/her business and realizes their business is worth less than what they need for retirement.  At that point, the business owner will shop around for a business broker who will tell them what they want to hear.  Then guess what happens?  Nothing.  The contingency-hungry business broker does a few things the first couple of months, but when the cricket chirping goes silent, the broker’s attention gets diverted to the next shiny nickel leaving the business owner languishing in limbo.  After waiting for “the market to turn around” (the most common broker excuse for not selling a client business), the business owner pulls the listing and the broker goes away. What can I say?  Over-priced businesses just don’t sell.

Flawed business

The second reason most retiring baby boomer business owners will not be able to sell their business is it has a flaw(s) that renders it essentially unsellable.  The most common flaws are poor financial records, customer concentration, or swings in revenue that render the future too unpredictable.  None of these flaws should be fatal, they can be fixed with sufficient time and focus, but if the retiring business owner is ready now and/or has to sell now, they don’t have the advantage of time.  The business is likely to not sell.

Poorly marketed business

Sorry to report, but way too many businesses are put on the market for sale, then not marketed properly. Poorly trained or incompetent business brokers are usually the culprit.  Let’s face it, it’s easy to talk a good game about having access to buyers, deals you’ve done in the past, etc.  But most business brokers simply post their client’s business for sale on publicly accessible websites, then wait for someone to call. Sometimes that strategy works, especially if it’s a properly priced good business.  But professional proactive marketing will always bring a faster sale for more money.  Always.  There is no mystery to selling a business.  Before you retain an intermediary to market your business for sale, it’s fair to ask them to specifically lay out what they will do to market your business.  If they can’t get past the basics of posting on websites, look for another intermediary.

It’s sad that many baby boomer business owners will not be able to sell their business to fund the retirement they want (or need). However, it’s good news that all of the three problems described here are solvable.  It takes time, energy, and it might even take some money.  But being proactive now to sell your business in three to four years will pay off in more ways than you might ever imagine.

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Tennessee Valley Group

Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.

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