Accepting that your business is failing can be hard. Through good times and bad, you’ve given everything you can to your business, but even after pulling out all the stops, there might be nothing you can do to pull you back from the brink.
Businesses fail for many reasons – from aggressive competition to changes in demand. But if you’ve found there’s no way to continue further, what should you do next?
Here’s where we come in. We often get asked: can I sell a failing business? The short answer is yes! Below we’ll dive into how you can do this and why a buyer might be interested in buying a business that is struggling.
How to Sell a Failing Business
Listing a business that is failing for sale is honestly very similar to listing any other business on the market. However, there are some steps you can take to make your business more attractive and increase your chances of finding a buyer.
1. Clear Any Litigation & Large Debts
As you’d expect, most buyers will give your business a pretty wide berth if there are any outstanding legal issues linked to your business.
This means you should clear up any litigation as a priority and try to reduce any debts as much as possible. Whilst it is possible to sell a business with debt, the more you can clear the more likely it is that you’ll be able to secure a higher selling price.
2. Identify Who Might Buy Your Business
Take some time to identify why buyers might be interested in buying your business despite the fact it’s not doing well. This will help direct you on how to best approach your sale.
Here are some common reasons people buy a failing business:
- They want to incorporate your business into their own existing one
- They’re acquiring assets, such as; your customer base, shop location, website, etc.
- They plan to restructure your business and turning it around to make a profit
- They have a business with more capital and can carry the loss until yours becomes profitable
- They’re buying your business to offset tax obligations
If you think a buyer might be interested in your business because of one of the above, then your chances of finding a buyer are promising.
3. Be Upfront & Honest
When it comes to selling your business, being honest about how it’s performing and upfront about any future challenges it might face is the best way to be.
There’s no point hiding your business’s poor performance with potential buyers. You want to establish trust and it’s key to ensure everyone is on the same page.
From the get-go, you should include details about your revenue and highlight any losses during the period that your business has been struggling.
There’s no point sugar-coating the issues your business is facing, as they will only come to light some time down the line when your sale is progressing with solicitors.
4. Consider Separating Assets
If you’re struggling to sell your failing business, another option is to split your assets and sell them separately.
This can include:
- Buildings and premises
- Equipment and technology
- Inventory and products
- Customer base
In some cases, separating your assets could even result in a selling price similar to what you would achieve if you were selling your business as a whole.
5. Be Patient
Selling a business takes time, and the process can feel even more drawn out if you’re selling a business that is failing.
The pool of potential buyers for a business that is struggling is significantly smaller than a regular business sale, so patience might be key for you to secure a good offer.
Additionally, buyers might need to take a little more time over the legal process and due diligence - as they will want to figure out the details of any potential restructuring.
And there you have it. Accepting that your business isn’t performing at its best can be sad, but if you prepare well and follow the above steps you may be able to get some return on your investment if your business sells.
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