Why You Can’t Sell Your Business
A great post by a Private Equity Group exposing the reasons why businesses that go to them don’t get acquired – 997 out of every 1,000 businesses are not investable. And here are some of the main reasons.
1. You have unrealistic expectations:
Don’t go by the average multiples in your market. Your business could be worth a lot less or a lot more. It’s probably worth a lot less. It’s highly likely to be worth a lot less or to be unsellable. Those averages you saw are not the average multiples for all the businesses in the market. That’s the average for the best businesses – the 20% of businesses that went to market and got sold. The other 80% of businesses didn’t get sold and if they did, the average you saw would be a lot, lot lower.
2. Your books are a mess:
If it’s difficult to unravel, difficult to see what’s going where then …it’s a problem transaction and high risk. Buyers aren’t looking for high risk.
3. Your business can’t exist without you:
You’ve built yourself a job, not a business!
4. Your cap table is messy:
Too many owners and a complicated ownership structure makes it difficult to get the deal over the line.
5. Your business is in California, New York, Etc:
Or any jurisdiction where there’s a lot of red tape / tax / other disincentives.
6. You exaggerate:
Yes, yes, we know how much of “potential” there is in the business!
7. Your advisors don’t want you to do a deal:
Unless they’ve got a stake in the transaction they may have a stake in the transaction NOT going through.
8. You or your representations are dishonest, breaking the law, and/or an a-hole:
9. Some combination of the above.
To read the full explanation and background to these points, visit the article here.