The results of an unscientific study (my experience) lead me to believe that 80% of small businesses need to tell a “story” to get a buyer seriously interested. What do I mean by a story?
Every business needs to describe their operations, uniqueness and qualities just like they explain their product or service to their customers. What I mean by, “tell a story” is they have to explain why the business is worth more than the financial statements indicate the company is worth.
The usual suspects of why are:
1. Too many personal, aka lifestyle, expenses run through the business.
2. Too much money pulled from the business leaving a weak balance sheet.
3. Lack of attention to margins and expenses.
4. Poor condition of the assets (they’ve been run into the ground and it’s up to the buyer to spend the money to replace them).
5. No business or marketing plan, which means what has been done may not be sustainable.
6. Poor culture (aka poor work ethic); in other words, when an owner says, “We don’t work too hard here” the buyer realizes it will be hard to get the employees out of their lazy habits to help grow the company.
7. Dependency on the owner for too many things.
Take care of the above, think big and look at the long-term benefit and instead of explaining why someone should pay more for your business (than they want to) you’ll be having buyers offering more than you imagined.