According to the US Bureau of Labor Statistics, there are roughly 31 million businesses in the US of which roughly 500,000 are sold every year. We have seen estimates that 30-40% of businesses listed for sale actually end up selling.
While we can only base our conclusions on anecdotal evidence, we believe the majority of the 30-40% of businesses that end up not being sold fall into one of the following four categories.
Fundamental flaws exist. When the company has irreconcilable flaws in the business or the business model, rarely are investors going to jump at the opportunity to throw good money after bad.
The company is overpriced. Either the owner has unrealistic expectations about his/her business’s value or the advisory firm has missed the mark on advising the owners when it comes to valuing the company.
Fundamental flaws exist. When the company has irreconcilable flaws in the business or the business model, rarely are investors going to jump at the opportunity to throw good money after bad.
The company is awash in a sea of red ink - the business is losing money and prospective buyers are not looking to buy a company out of the trash bin. unless it is a distressed industry buyer (and we know some) who have framed their business strategy on the premise of buying poorly run companies and turning them around or integrating them into other companies in their portfolio.
The company has chosen a broker or investment banker who lacks the skills , experience and perseverance to market the company to willing buyers and the ability to bring both sides together with the art of compromise to achieve the end goal.