What is the Main Reason Companies Put on the Market Don’t Sell? – LinkedIn Results

Last week we asked our Advisor community, “What is the main reason companies put on the market don’t sell?” Here are the results:

55% said Unrealistic Value Expectations
22% said Owner gets Cold Feet
4% said Unreasonable Terms
20% said Not ready / fails due diligence

EPI President, Scott Snider, provides a deeper look into this question:

We see from many lower middle market and small business studies that almost 70% of companies put on the market today don’t sell because the business is not ready. It’s too risky or too dependent on the current owner. The buyer cannot replicate it therefore cannot scale it. However, all four of these answers are correct and I believe we see this throughout are market.

Business Value – Not All Business Owners Understand Value

Business owners don’t understand what drives value and therefore have an unrealistic opinion of it. And I think that is natural. Everyone thinks their newborn baby is beautiful, in fact it could be one of the ugliest babies people have seen. A business owner, especially one who has spent the last 30+ years building their company, caring for it, caring for their people and customers, likely thinks their business is beautiful when it may in fact be an “ugly baby”. Following that same line, business owners also tend to get cold feet right at the end of the deal, especially those in smaller companies. They likely identify with the company, it’s a part of who they are. They get uneasy about the future and start to regret or question their decision.

I know I did when I sold my company in 2010 as a 24-year-old. It was all I knew. I started the company at 15 years old and had never worked for anyone. My business had a typical start up story. I started my landscaping company out of the trunk of a sedan and grew it to 13 employees and a handful of trucks. I had never worked for anyone before, had no college degree, and now “Scott the landscaper” is going away? This big change left me feeling uneasy. I think all four of these options show us that owners need more education around exit planning and why it is important.

Exit Planning Starts Now

The best place to begin is by pulling exit strategy into the now and not have it be something to think about in the future. If we can make the Value Acceleration language and process a part of their cultures and daily jives we will certainly change their outcomes. We will have owners who understand value and have real and reasonable expectations. We will have owners who aren’t scared to exit. Owners will know who they are in and out of their business and will have personal and personal financial goals. Above all, we will have ready and attractive companies that are positioned for growth and are ready to be transitioned.