You were always willing to give your all to make your business profitable, but it seems like it wasn’t meant to be. After years of hard work and sacrifice, your business is now unprofitable, and you are considering selling it. You know that this may be the hardest decision you have ever made, but you are thinking of the long-term potential this could bring. Last year alone, 76 per cent of the companies that went public were losing money the year before their IPOs. Selling an unprofitable business can be lengthy and challenging, but it doesn’t have to be if you have the right exit tips.
What is an unprofitable business?
An unprofitable business cannot cover its costs of operations. A company must have a negative net income after taxes and other adjustments to be unprofitable, meaning that the business is not making a profit, is in debt, or has negative equity.
Can I sell a business that is not profitable?
Yes, you can. If you think of selling a business that is not generating profits, you will want to be prepared for a long and complex sales process.
You will need to build a strong case for why your business should be purchased and be prepared to provide detailed financial information and projections.
Additionally, you will need to be well-versed in the market and know what opportunities are available in your sector.
If you can convincingly present your case and demonstrate that your business is a good investment, you may be able to sell your business for a nominal price.
However, if you do not have a strong case or the market is not favourable, you may be forced to sell your business for a lower price or to a different buyer.
How do I sell an unprofitable business?
There are a few things to keep in mind before you begin the process.
1. Understand your business’s strengths and weaknesses
If you are considering selling your unprofitable business, it is essential to understand your business’s strengths and weaknesses.
Your strengths may include a loyal customer base, a unique product or service, or a strong brand. Your liabilities may include a poorly designed website, a lack of marketing, or a low customer retention rate.
Using this information, you can create a sales strategy tailored to your business’s strengths. Understanding your business’s strengths and weaknesses is key to selling your unprofitable business.
2. Prepare your financial and legal papers
When you decide to sell your business, you will likely face many questions from prospective buyers, especially if your company is not yet in bankruptcy or if your business is not particularly lucrative.
Prospective buyers want to know your company’s finances, legal status, and personnel. One way to prepare for these questions is to do due diligence.
Due diligence entails reviewing the company’s legal, financial, and personnel records. Buyers can use this information to determine whether the company is worthwhile as an investment and why it is not profitable.
3. Estimate Business Value
You can determine a business’s value in various ways other than its profitability.
If the company has gained some crucial contracts, developed some innovative technology, or has other valuable assets, these can increase the company’s value to prospective buyers.
Many buyers purchase companies based on potential earnings rather than current profits. Also, a large firm may buy a minor operation and use its deeper resources to turn a profit where the original owners lacked the capabilities.
4. Find Who can continue or better your vision
If you want to ensure that your legacy endures and that your vision continues to benefit your team, clients, and community, you will need to locate someone who shares your objectives and is equipped with the knowledge and tools required to change things.
A savvy and competent buyer is essential to achieving these goals. Finding a buyer who shares your objectives can be a complex process.
You must be thorough in your research and carefully assess the buyer’s capabilities. Make sure you are speaking with someone knowledgeable about the industry.
5. Bargain from a position of strength
Because you see the lack of profits as a sign of weakness and believe that you are only trying to regain a portion of the money, time, and effort you poured into the failing business; you negotiate out of fear and desperation.
However, when you learn the actual value of your assets, you can negotiate from a position of strength. You can exit the business with a profit if you can negotiate a reasonable price for these assets.
It is a different approach than selling out of panic, hoping to regain a portion of the money, time, and effort they poured into the company.
6. Go for an investor
If you are considering selling your unprofitable business, I recommend selling to an investor. Why? Because an investor will be interested in any business, no matter the price.
They are passionate about finding opportunities and turning them into successful companies. Second, investors have the tools and experience to turn around a failing business.
They have the knowledge and the resources to fix your business and make it profitable. Third, an investor knows what you are going through and the legacy you’ve built.
They understand what it takes to turn a business around and make it profitable. Selling to an investor is the best way to get the most money for your business and get it off your hands.
7. Seek a Professional help
Finally, be sure to enlist the help of a qualified professional. Selling a business is a complex process, and you’ll likely need the use of a qualified attorney, accountant, or mediator.
Hiring a professional can cost you, but getting the procedure right is worth it. If you’re ready to sell your business, start the process by contacting a qualified professional.
They can help you navigate the selling process and ensure it goes as smoothly as possible.
If you’re unsure who to contact, start with a list of business brokers in your area. They can provide you with a list of qualified professionals who can help you sell your business.
Bottom line
Selling an unprofitable business is a long and often frustrating process. Don’t rush into a sale just because you feel pressured. Take the time to get the company sold suitably, and you’ll be able to move on with your life with a clear conscience.
