Common aspects that create buyer risk, uncertainty, doubt and decrease your economic appeal when selling your business

If you’ve found this page and haven’t yet downloaded the ‘RUDE Booklet for selling your business for its true valuethen click here to download it first.  Otherwise, read on…

What follows are a list of common Risks, Uncertainties, Doubts and Economic Unappealing aspects of a business. These are far from a full and comprehensive list but they are an excellent starting point.

 

Common things that create Risk in a business, especially to an incoming business owner:

  • Small number of customers
  • Large percentage of turnover dependent on one or a small number of clients.
  • No or limited contracts with clients or suppliers
  • Very high reliance on a small number of key, ‘difficult to replace’ staff.
  • Highly reliant on one supplier.
  • High levels of un-reported income.
  • Aging or damaged equipment that may be difficult, expensive or impossible to fix.
  • Very high rent or unfavorable lease terms (especially if coupled with low profit margins)
  • High working capital requirements for the day to day operations of the business.

 

Common things that increase a potential buyer’s Uncertainty about the business’s future.

  • Limited time remaining on the lease
  • High level of knowledge needed to run the business
  • High reliance on the owner for day to day operations
  • Uncertain or changing industry
  • Changes in local or otherwise direct competition
  • Unpredictable or erratic changes in turnover year to year.
  • Very low barriers to entry into industry
  • Lack of proof for un-reported income (if any)
  • High levels of unpaid debt
  • Complex business with limited or know management or system documentation

 

Common things that cause a potential buyer to Doubt your reasons for selling or that they’re making the right decision.

  • Unclear reasons for selling
  • Lack of contracts for ongoing verbal agreements with clients or suppliers
  • No or limited supporting documents for financial reporting.
  • Owner has conflicting financial interests such as a similar business that may compete with or cannibalise sales of business on offer.
  • Important information not readily available to potential buyers.
  • Lack of implemented compliance across areas of the business.
  • Un-resolved legal issues.

 

Common things that decrease the Economic Appeal for potential buyers of your business.

  • Lack of business documentation and automation systems
  • Highly specialised knowledge needed to operate
  • Very high stock levels required to run the business
  • No offer of vendor finance or payment options
  • Lack of management structure causing a high reliance on the owner
  • Ageing equipment with high repair or ongoing maintenance costs
  • Lack of supporting financial documentation needed to acquire a business loan.
  • Sales price too high for target market (closer to sale decision)
  • Banks not lending for businesses in your industry
  • Very high working capital requirements for the day to day operations of the business.

Now this isn’t a full and comprehensive list by any standards, but it’s an excellent starting point. It should also give you a clearer idea of what types of issues can fit into each category of the RUDE system. If you need any further assistance please don’t hesitate to get in contact, furthermore, if you’ve made some progress on your RUDE booklet and would like some more assistance with selling your business, simply click here to enquire directly with us or give us a call on (02) 9817 3331.

I look forward to talking to you. Until then, good luck with your business sale!

PS. The RUDE system is from our DIY business sales book that we’ve recently launched. If you’re more of a DIY sort of person when if comes to selling your business, click here to find out more.

By Zoran Sarabaca
Principal
Xcllusive Business Sales PTY LTD
Sell your business with Certainty
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