These issues apply across industries. Here are seven reasons why owners encounter failure when they attempt to sell their business (especially on their own):
Infrequent financial reporting and lack of attention to financial metrics. We often meet business owners who neglect to regularly monitor financial statements or make prudent adjustments that could substantially improve their financial results. With today's financial apps, you can monitor your bank balances, accounts receivables, and accounts payable on a daily basis. Don't let yourself be surprised by a sudden crisis in your cash conversion cycle. Nothing is more important than your financial statements. We see many owners who operate their business as a “lifestyle business” that is focused only on the owner's personal salary and compensation, not the long-term value and viability of their business.
Their customer market is changing and they haven't adapted despite plenty of warning. If your customers pay you through government programs such as Medicare or private insurance companies be aware of any changes in legislation that will affect your business. Are you a technology or software business? Always keep on top of disruptive emerging technologies. Don't allow yourself to become a 'buggy-whip' business.
The business owner sees their business spiraling downward, panics, and then wants to sell as it approaches collapse. You must adapt to new developments in your industry. Are you being overcome by brash, new competitors? Stay abreast of all new trends in your industry. Many owners will simply panic and try to sell to an unsuspecting buyer. This rarely happens because no buyer wants to buy a business heading in a downward trajectory. Unfortunately many business owners are not willing to make the kind of capex investments and management investments that will keep them competitive. This makes it almost impossible to sell their business for decent value.
The business operates in a highly regulated environment that changed due to new regulations or legislation. Most industries have trade associations that lobby politicians on behalf of their membership. Join these trade associations. They can provide invaluable services and education to their members. Your competitors belong and so should you.
Management turnover was high and salaries were below industry standards for a significant period of time. Buyers see excess attrition as a warning of even deeper management and culture problems in the company. Human capital can ultimately lead to greater success than even financial capital can achieve.
Unionized employees or outdated employment agreements. Business buyers are typically concerned about excess control of a unionized workforce (with the exception of certain government infrastructure or similar contractors). Negotiating with unions and collective bargaining is best left to professionals. Engage with appropriate advisors to help you in this area.
The company location has become obsolete. Is your location outdated or too small? Business buyers want to expand their new business acquisition to maximize potential. This is especially true in the case of private equity investors, who seek scalability in their acquisitions. No perceived scalability = no deal.
The great basketball coach, John Wooden, once wrote that “failure isn’t fatal, but failure to change might be.” In the situations described above, we have seen numerous business owners honestly assess their circumstances, re-align with the core values of their companies, and over time, successfully solve the problems impeding their growth. The necessary “changes” that Coach Wooden spoke of are always obvious if one looks hard enough. The difference was the courage and discipline required to execute change in the face of difficult business challenges. As your experienced Las Vegas business brokers, we will be your "coach" and help you navigate through the process required to market your Las Vegas business for sale.