As a business broker in Toronto, I frequently receive calls from small business owners who are seriously looking to sell their businesses. unfortunately, a majority of these businesses are simply to sell-able. These business owners mistakenly believe that businesses brokers can sell any type of businesses including recently started businesses that are not making money. This cannot be further from the truth.
If you have recently started a business and are not able to make it profitable yet, then exploring your exit options is a smart idea especially if the business is bleeding money. Unfortunately selling the business is rarely the right exit option for the following reasons:
- Most business buyers are looking to make a living from buying a small business. Their tolerance to risk is generally much lower that entrepreneurs who start a business for scratch. These buyers look for business that can make decent income so they can support themselves and their families. So buying a money loosing business is definitively not the right option for these buyers.
- Selling a business takes generally between 6 months and 1 year. Sometimes, it can take even more time. Moreover, the percentage of small business that sell is generally less than 20% of all businesses on the market. If the business is loosing money, then enduring another year or more of sustainable loss just for the hope of buying a business is generally not worth the risk, especially given the odds that the business might never sell.
- Even the best business brokers cannot make miracles. Business brokers can only sell a business if they would sell it to their mother. they can only sell a money losing business to a buyer with a proven turn around skills and only if the business has a proven business model but is miss-managed. Most failing start-ups do not fall in this category however. Start-ups explore unproven business models and generally fail because their products or services cannot be profitably delivered to the target market. If for example a retail store has invested massively in leasehold improvements but is not located in a suitable location, it's very difficult to find a buyer who will assume the owner's mistake.
