Business Brokerage .
Steve Skrlac, MBA, CFA
sales representative
.
Selling a Business That is Less than One Year Old
Sometimes business owners find themselves in situations where they must sell a business in the same year that they started it up. From the perspective of selling your business, this could be a hurdle that must be overcome.
That being said though, there are some very compelling (and not so compelling) reasons why a business might need to be sold so quickly after launch.
Some reasons why a new business may have to be sold: Not profitable Don’t have the aptitude for it Working capital constraints Competition Personal issues Partnership dispute Selling a business that is less than one year old may certainly raise some questions with potential investors. The key is to property articulate the reason why you are divesting of your business. If the motive is reasonable then finding a buyer may be no more difficult than any other similar business. Fundamentally, buyers are concerned with what the business will look like going forward. A newly formed business is not reason enough to dissuade some buyers from buying it if the business is truly stable and there is compelling evidence to suggest that it will have a bright future.
If you would like to list your business for sale because it is not profitable, this is a challenging situation. Most buyers are looking for profitable businesses for sale with a proven track record where they can continue on the path or growth and profitability.
Suppose a business owner started a manufacturing company that they were completely unsuited for. This may be a reason to sell a business shortly after launch. A buyer with a better aptitude for such a business may see the legitimate potential in the enterprise and put in an offer.
Owning and operating a business takes money. Sometimes new business owners spend too much upfront on things like leasehold improvements, equipment or advertising and don’t have enough of a float to manage their cashflow properly. There may not be anything structurally wrong with the venture but not having access to capital may be a very strong reason to list a business for sale.
Even the best business plans have the element of risk baked into them. A business may have the brightest prospects but all of that could change if a major competitor opened doors in the same marketplace and changed the dynamics of the business. Sometimes selling the business to the competitor is a viable option.
Family or personal related issues can surprise anyone without a moment’s notice. A business may need to be sold quickly for non-business related issues altogether.
A business may need to be listed for sale due to the inability of two business partners working together. The business may be absolutely fine in terms of financial viability but personal animosity may prevent current ownership from working as a team.