Why Small Businesses Don't Sell

Did you know that only 20 percent of businesses listed for sale actually sell? In other words, this means that four out of every five businesses don’t sell; as a business owner, if you can understand why certain companies don’t sell then you can position yourself to avoid the common mistakes that so many owners make, and become one of the 20 percent that succeed when selling their business.

Data on small business transactions can be difficult to obtain, so while there are thousands of articles that provide a step-by-step guide on “how to sell your business,” very few provide any relevant detail about the actions and characteristics that produce success; however, one excellent source exists.

Each quarter, the Pepperdine Private Capital Markets Project, run by professors at the Pepperdine University Graziadio School of Business, releases a report assessing the market conditions for small business transactions. In one of their 2013 reports, they listed five common reasons that companies don’t sell and are subsequently taken off the market (“percent” indicates percentage of survey respondents who gave this answer):

1.) Seller’s Unrealistic Expectations (33 percent)
2.) Lack of Buyer Preparation (15 percent)
3.) Poor Seller Preparation (11 percent)
4.) Unreasonable Non-Financial Demands (9 percent)
5.) Personality Conflicts (9 percent)

The study also surveyed M&A professionals about the biggest mistakes made by sellers that ultimately hurt their chance of successfully completing a deal. The top three answers were:

1.) Unrealistic Expectations (50 percent)
2.) Declining Business Sales (16 percent)
3.) Poor Financial Records (15 percent)

As the two lists suggest, the seller has control over the majority of items that can cause a deal to fail. We'll examine a few of them in depth in my next tips.

Peter Holton is the Managing Director for Caber Hill Advisors and has been in the service industry for nearly 20 years and is well known and respected throughout facility maintenance industry. He manages the firm's practice facility maintenance sectors. Peter offers valuations, exit planning, consulting and buying or selling business. He has performed numerous speaking engagements for organizations such as ISSA and BSCAI. He can be reached at peter@caberhill.com or by visiting www.caberhill.com.