Understanding the Odds of Selling a Business
When it comes to buying or selling a business, we often get asked two common questions: “How many businesses are for sale?” and “What percentage of businesses on the market actually sell?”
To get a sense of the market, it’s important to break things down by business category. The industries that make up the majority of small to mid-sized business sales include: manufacturing, wholesale trade, retail trade, business and personal services, and household/miscellaneous services. Together, these sectors represent a significant portion of the approximately 30 million businesses in the U.S.
It’s commonly estimated that around 15-20% of small businesses are for sale at any given time, though this figure can vary depending on market conditions. Interestingly, smaller businesses—especially those with fewer than four employees—make up a larger portion of the businesses on the market. However, it’s generally observed that the sale success rates for smaller businesses tend to be lower than for larger ones. Smaller businesses, especially those with fewer than five employees, are often seen as having more challenges, such as incomplete financial records or unrealistic pricing, which can affect their chances of a successful sale.
So why do smaller businesses struggle to sell at the same rate as larger ones? Several factors come into play. Smaller businesses often face challenges like inaccurate financial records or unrealistic pricing. Some owners may not be fully committed to selling or may not be prepared for the complexities of the sales process. In some cases, owners might simply close their doors rather than attempt to sell.
Another key reason small businesses often struggle to sell is that their owners may not be properly prepared for the sale process. Many business owners, especially those with fewer than five employees, fail to plan ahead for the sale. This lack of preparation can include everything from neglecting to update financial statements and resolve legal issues to failing to optimize the business for sale by streamlining operations. If a potential buyer sees these areas as red flags, they might walk away, even if the asking price is reasonable.
To improve the odds of a successful sale, business owners should take a few proactive steps. First, they should invest time in cleaning up their financial records, ensuring that they are transparent and up-to-date. It’s also wise to engage a professional who can provide expert advice, market insight, and help with valuation. Additionally, business owners should focus on making their business more attractive to potential buyers by demonstrating a stable, profitable operation with room for growth. Taking these steps can significantly improve a business’s chances of selling successfully.
Copyright: Business Brokerage Press, Inc.
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The Entrepreneur: Understanding Strengths and Weaknesses
Entrepreneurs are typically dynamic and driven individuals who play a critical role in driving innovation. However, to succeed, they must leverage their strengths while being mindful of their weaknesses. By understanding both, entrepreneurs can maximize their potential and build more sustainable businesses.
Strengths of Entrepreneurs
Flexibility and Positive Attitudes
Entrepreneurs are highly resilient and maintain a positive outlook, even in challenging situations. These traits help them navigate market shifts, customer needs, and unforeseen obstacles with confidence.
Creativity and Willingness to Take Risks
Creativity is a hallmark of entrepreneurship. Entrepreneurs excel at generating new ideas and solutions. At the same time, they are comfortable taking calculated risks that can disrupt industries.
Goal-Focused and Committed to Success
The most successful entrepreneurs are driven by clear goals. Their focus on success fuels both day-to-day operations and long-term strategies. Through this means, they stay on course even when faced with setbacks.
Strong Organizational Skills
Despite their busy schedules, many entrepreneurs possess excellent organizational abilities. They prioritize effectively and manage deadlines. All of this is necessary to ensure the business runs smoothly.
High Energy Levels
Entrepreneurs often demonstrate a great deal of energy. Their lifestyles often require long hours and maintaining enthusiasm. This level of energy not only drives their own work but can also inspire teams and stakeholders.
Weaknesses of Entrepreneurs
Impatience with Results
Entrepreneurs are ambitious about achieving their goals, but they often want quick results. This impatience can lead to frustration. Sometimes it can also lead to rash decisions that may undermine long-term success.
Distraction
Juggling multiple responsibilities can lead to distractions and a lack of focus. Entrepreneurs may struggle to prioritize effectively, which can cause delays and impact the quality of work.
Distrust of New Technology
While entrepreneurs are generally innovative, some can be hesitant to embrace new technologies. This reluctance can limit their ability to leverage advancements that could benefit them in the long-run, improving efficiency and competitiveness.
Tendency to Stray from Plans
Entrepreneurs’ passion and creativity sometimes lead them to drift from their original business plans. While flexibility is important, straying too far from the vision can waste resources and cause a degree of chaos.
Difficulty Delegating
Many entrepreneurs are reluctant to delegate tasks, especially in the early stages of their businesses. This can lead to burnout and limit the growth of the business. Learning to trust and empower others is key to scaling effectively.
By embracing their core abilities, which often include such traits as creativity, focus, and energy, while recognizing addressing areas that might need improvement like impatience, distraction, and reluctance to delegate, entrepreneurs can take the first step towards improving operations.
Copyright: Business Brokerage Press, Inc.
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Does Your Company Have an “Orphaned” Product or Service?
Many businesses have a product or service that’s performing reasonably well, perhaps even thriving, but doesn’t quite align with the company’s core offerings. It’s often called an “orphaned” product—a good or service that is disconnected from the company’s main focus. If you find yourself in this situation, don’t panic. It’s more common than you might think. In fact, there are many buyers, from individual investors to private equity firms, actively seeking product lines that can complement or enhance their existing portfolios. Some may even be looking for a standalone product or service they can build an entire business around.
If you’re considering whether to divest your orphaned product or service, here are a few reasons why it might make sense for your company.
Improved Focus and Efficiency
One of the primary reasons to divest an orphaned product is the opportunity it provides to refocus your company’s efforts. An orphaned product, even if it’s successful, can distract your team and resources from the core business. Spreading attention too thin can hold back overall progress. By divesting, you free up time, energy, and capital to concentrate on what truly matters—your core products or services. This focus can lead to more effective innovation, better customer service, and faster growth.
Unlocking Capital for Core Business Growth
Another compelling reason to divest an orphaned product is the potential financial benefit. By selling or offloading the product line, you can generate cash that can be reinvested into your core business. This infusion of capital can help fund new initiatives, accelerate innovation, expand market reach, or even strengthen operational efficiency. In many cases, divesting an underperforming or non-core product is the fastest and most straightforward way to unlock funds that can drive meaningful growth.
Redirecting Resources to More Profitable Areas
Even if the orphaned product is profitable on its own, it may still be a drain on your company’s resources when you factor in management time, logistics, and operational costs. By divesting the orphaned product, you can redirect those resources toward more profitable areas of your business. In some cases, a seemingly profitable product might not be as strategic or scalable as other parts of your company. Divesting it could enable you to invest in higher-margin products or new markets that offer greater long-term potential.
Unlocking New Opportunities
Selling or divesting an orphaned product line can also open doors to new opportunities that were previously inaccessible. The capital, focus, and resources freed up by a divestment might allow your business to explore new product lines, enter new markets, or partner with other businesses in ways you couldn’t have before. This kind of strategic reallocation of resources can invigorate your company and create exciting avenues for future growth.
While divesting an orphaned product can provide significant benefits, it’s not without risks. Parting with a product line requires careful thought and planning. You will want to think about the impact on brand identity, customer relationships, and company culture. It’s important to weigh both the pros and cons before making such a decision.
Divesting can help refocus your company, unlock capital, and reallocate resources to areas with greater potential. However, it’s crucial to approach divestment strategically, with a clear understanding of the potential benefits and risks. In the end, a well-timed divestment can lead to growth and opportunity, but it’s essential to make the decision based on a thorough evaluation of your company’s goals.
Copyright: Business Brokerage Press, Inc.
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