Capital Strategies

You may be surprised to learn that if you want to sell your business, there is about a one in five chance of actually achieving that goal. Even with strong financial performance, sometimes businesses with less than $1,000,000 in revenues don’t sell.  According to BizBuySell, the largest online business-selling platform: only 20% of all of the businesses listed for sale ever sell, roughly 50% of the deals agreed to between buyer and seller never close only 10% of sales are handled by business brokers  The last fact may explain the first two! Here's my list of Why Businesses Don’t Sell: Seller believed the business was worth more than valuation showed and wouldn’t negotiate on the price or terms.    Seller wanted all cash and was unwilling to carry part of the financing. Buyer liked the business but it failed the “rule of thumb test” meaning that the cash flow was insufficient to pay the acquisition debt payments and provide the buyer with a living wage.

The other day an attorney friend said in his best Scrooge-like voice, “I don’t like goodwill.” Because we were discussing business sales, I knew he wasn’t referring to the happy, peaceful, holiday goodwill. He meant business goodwill except he called it “blue-sky”. Contrary to popular belief, the word blue-sky is not synonymous with goodwill. Goodwill has more than one meaning especially at this time of year, but blue-sky isn’t one of them.   My attorney friend was confusing something of no value (blue-sky) with a sale-able asset (goodwill). While some owners do have blue-sky dreams, the buyer purchases goodwill and tangible assets when a business is transferred in an asset sale.  According to Merriam-Webster’s dictionary, Goodwill is:  1)     a kindly feeling of approval and support; benevolent interest or concern;  2)     the favor or advantage that a business has acquired especially through its brands and its good reputation;  3)     the value of projected ear