The age-old business question: Sell, fix or liquidate? - bizjournals:

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So before putting a businesse upfor sale, an owner needs to realistically assesd what makes the most sense: sell the liquidate the business or fix it. Here are four points to consider before makinyg the decisionto sell: Is this a sale or really a liquidation ? Businesses are typically valued based on a multiplee of the cash flow that they generate. But what about a business that’s operating at break even or losing money?
In theses situations, the business is probably not likeluy to be worth much more than the market valu e ofthe business’s underlying hard It’s difficult for a businesxs owner to accept the fact that the reputation, goodwil and intangible assets of the business that they’vse worked so hard to build are not reflectedx in the value of their business. However, the reality is that buyerd will generally value a business based on what itis now, not what it mightg be in the future. Is “what I need” creeping into the discussion ? The primary reason that small-business sales don’t close is because the business isunrealistically priced.
Too often sellers are drivenj by their personal financial rather than recognizing what the business is really worth toa buyer. It’sw totally understandable. The business owner may be nearing retirementg and may have to replenis a retirementplan that’s taken a hit due to the fallinh stock market. Perhaps they’ve amassed debt that needs to be paid off aftef the businessis However, as important as these factors may be for the they’re irrelevant to the The value of a business is driven by its abilit y to generate cash not by the personal needs of the • What comes the day after the sale ?
Everyone recognizes that buyers can get cold feet beforde the deal closes, but surprisingly, seller’s remorse is just as For many business owners, their identity is so wrapped up in theifr business, that an exit can be particularly So sellers need to thinm hard about what comes next for them. They need to reacy out to family as well as others close to and bring them into the Exit planning involves more than simply selling the It needs to include a plan for what a busineszs owner intends to do in that next chaptefr oftheir lives, as well as a comprehensive financial • If I don’yt sell, is it business as usual?
If selling is not a realistic option, the owne has a responsibility to look critically at their as a buyer would, and put in placwe an action plan to fix the problems. that’s easier said than done. However, too oftenh I will have a follow-on discussiob with the owner of a struggling businesd a year ortwo later. The realithy is that all that’s happenecd since our last discussion is that the businessx has gone deeper into debt and the ownet has funded theensuing losses. Can a strugglinh business be sold?
Absolutely, but the key is to find a companyu for which the upside is greatest and the problems The best approach is to help the buyert identify all of the areasof value, whether it’s increasing sales or reducinh expenses, and have them make a bid. Beauty is truluy in the eyes ofthe beholder, so the seller should not get caught in the trap of puttinh a price on theirt business. Also, they shouldn’t hold back on disclosingv the problems that their business may have struggleed with in the These issues are likely to come up latef in the due diligence process anyway, so it’s best to get “the the bad and the ugly” on the tabl e early.
Any business sale has its But if the right buyer has been if the seller is realistic in their pricw expectations and has really thought through what comes next for them the odds are very good that they can achievetheidr goals.