Why do only 20% of the Small to Medium sized businesses placed on the market sell?
Murray Yeates, partner at Tabak Business Sales Waikato, answers:
There are a variety of reasons why a business doesn’t sell. Purchasers are not attracted to a certain industry, purchasers believe the future profits of the business will be affected by technology changes, changing consumer demand or the business could be affected by local or national Government polices.
But more than likely the main reason will be either:
The asking price is too high
The business cannot be easily transferred
To explain the first point (The asking price is too high) I will give an example of how a typical business owner goes through the selling process.
Most business owners have never sold a business before. For most of them they do not know where to begin, so understandably they will seek out their advisors. For most business owners this will be their accountant.
They meet with their accountant and the first question they will ask is “how much is my business worth?” As their trusted advisor the accountant will most likely try and give them an answer to this question.
Unfortunately, this is where the problems starts, because it is actually the wrong question.
Why is this question wrong?
The problem with this question is it will most likely give the business owner an answer that will put them in a position where they will be part of the 80% of businesses that don’t sell.
What the question should have been is, “how much would a purchaser be likely to pay for my business in today’s market?”
These two questions may seem similar but more often than not they will give very different answers.
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Contact Tabak Waikato:
Address: 45 Seddon Road, Hamiton, 3204
Ph: 07 839 5863
Fax: 07 846 0193
Website: www.tabak.co.nz
Facebook: www.facebook.com/TabakWaikato
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