Small Business Expectations for Selling May Be Too High

By Nathan Eddy  |  Posted 2015-07-01 Print this article Print
bizbuysell and smbs

The results of a survey suggest some owners may have unrealistic expectations when it comes to business value or finding the right fit.

Owners were four times more likely than brokers to blame a lack of qualified buyers as the reason small businesses remain on the market for an extended period of time or don't sell at all, according to a survey of more than 500 small business owners and 300 business brokers.

The results of the survey by suggest some owners may have unrealistic expectations when it comes to business value or finding the right fit.

"While it makes sense that owners would prioritize buyers who can continue running the business successfully, I still thought it was surprising that so many owners listed 'a good buyer fit' as their top sale priority over 'getting the highest price'.’ Although finding the right fit is an important goal, realistically it’s probably unlikely many owners would pass up a larger check," Bob House general manager of, told eWEEK.

House explained that during the Great Recession, seller financing became an essential component of closing transactions since many buyers lacked the capital necessary to pay upfront.

While 74 percent of brokers believe seller financing is either essential or important to closing deals today, just 58 percent of owners believe the same.

"Given recent signs of a stronger economy, it's now tempting for business sellers to think that they don't need to offer seller financing to buyers. However, the improvement doesn't negate the benefits of seller financing or eliminate the need for many sellers to offer some form of financing," he said. "It can still be difficult for buyers to get a loan or enough capital to buy a business. Owners can also benefit from offering seller-financing as well."

House explained it could help speed up the time it takes to sell, result in a higher sale price, reduce taxes and give the seller more room to negotiate other concessions.

"Having some of the seller's skin in the game also increases buyer confidence and ensures the seller will be active in continuing the venture's success through training and support," he said. "Many owners haven’t sold a business before or aren’t planning on selling until much further down the line. These owners, therefore, are less familiar with the selling process and the realities of the market."

House explained that since owners have invested so much of their sweat into the business over the years, it is hard to be objective about its true value and the time it might take to find a buyer in whom the owner has confidence.

"Brokers, on the other hand, have years of expertise in the selling process," he noted. "They see what is actually happening in the business-for-sale market right now. As owners get closer to selling and either do their own research or hire a broker of their own, they will gain a better understanding of what to expect."



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