By understanding the reasons limousine businesses don’t sell, future sellers will have a better chance of successfully completing their transactions. The most common reason is not understanding and establishing a fair market value for the business. Rumors, lies, misunderstandings, and secrecy compound the problem. To know what your business is truly worth in order to make an informed decision about selling it, get an independent, third-party valuation. A business valuation is part of the decision process.
What follows are a few of the more common reasons why businesses don’t sell, and there are many more. If an owner is considering selling, he/she should examine each of these issues as a checklist before moving forward to a final selling decision.
1. Unbalanced Scales
Are sellers’ expectations realistic? Often the seller has a difficult time separating what the business is currently worth versus what he or she has invested in it. Buyers can be sympathetic, but they won’t pay for anything but results. Your initial $150,000 investment, the $250,000 needed for retirement, the $75,000 you are upside down in your fleet, your pressing creditors and IRS obligations—all of those are yours. Buyers feel no obligation and have no desire to be involved. The cold hard fact is that buyers are not required to pay for the seller’s mistakes or unrealistic expectations.
2. Forgetting Your Papers
Missing documentation is an expensive mistake for many sellers. Lack of adequate profit-and-loss statements, balance sheets, sales reports, cash flow reports, and history of major activities can all add up to the seller losing tens of thousands of dollars. If a seller can’t document the business and a prospective buyer can’t confirm it during due diligence, the seller usually doesn’t get paid for it. The better the documentation, the better the price and the smoother a transaction will go. Sometimes in an effort to minimize taxes, sellers actually shoot themselves in the foot. The cash that mysteriously doesn’t exist can mean thousands of dollars in undocumented value. One of the strongest sources for good documentation is third-party documentation. Audits and reviews produced by a reputable accounting firm are excellent.
3. No Give and Take
Lack of flexibility on the seller’s part is often a deal killer. If you have one of the few companies that is highly profitable and sought after, flexibility is less important. But if your company is like most limousine companies, flexibility is essential. A seller who is willing to consider creative payment programs, different types of guarantees and reserves, and generally exhibits a lot of give and take will improve overall chances of closing a sale. Flexibility does not mean take a lesser deal, but will help net a seller a better deal.
4. Lack of Direction
If it is the desire of the seller to complete a transaction in the next year or two, decisions affecting positioning, staffing, structure, profitability, fleet, and cash flow will change. Sellers that plan ahead, develop marketing strategies, and assemble a professional team will be able to position their company in a more favorable light, negotiate stronger, and yield greater net proceeds than those sellers who take a short view.
5. Sloppy Housekeeping
The physical home of your business and the outward appearance of the way your operation performs can affect a buyer’s willingness to move the deal forward. There is much that can be done to enhance the physical presentation of a business facility. Relatively inexpensive cosmetics such as cleaning, painting, organizing, furniture, etc. can have a tremendous effect on first impressions of a buyer. In 1999, a Ft. Lauderdale company was presented to a buyer via an offering memorandum. The buyer was interested enough to make a site visit. The shop was filthy, the fleet was in disrepair, the office was trashed, files and paper were everywhere, the staff was loud and appeared unprofessional. Although the seller had a good financial presentation, the buyer was totally put off by the physical appearance and passed on the deal.
6. Not Listening to “The Donald”
In Donald Trump’s book “The Art of the Deal,” deal makers and deal breakers are discussed. All transactions of consequence should involve a good attorney and accountant at a minimum. On the other hand, these same attorneys, accountants and similar advisors are responsible for many transactions not being completed. They are not automatically qualified to be a part of your team. Unless your advisors have specific experience and training in the area of business transactions, be careful about the advice you receive. Advice received might range from good to bad to actually motivated by greed and fear of losing an ongoing client account. Interview your advisers as if they were the most important employees you have ever hired, and check their references.
7. Lackluster Marketing
The Dallas Morning News recently ran an ad that stated, “Established limousine and car service. Good cash flow. Best offer.” Marketing your business for sale involves more than just placing an ad. It involves developing a marketing strategy. You need to identify who might be interested in buying the business and paying the best price for it, and how to contact these prospects. Also, you should determine the fair market value for your business, and be able to justify that price to the prospect. Poor advertising, poor marketing and poor representation usually equals no transaction, or at least not the best transaction for the seller.
8. Unable to Go the Distance
One serious issue that is often overlooked in selling a business is the owner’s motivation or lack thereof. Selling a business is challenging. It is a part-time job for the seller. Sellers get discouraged and often won’t complete the process. Unless a seller has a clearly defined motivation, there is usually not enough sticking power to get the transaction completed. If you cannot write out your specific motivations for selling your business, you are probably not motivated enough to successfully complete a transaction. Do you have a plan for what you will do after the business sells? Is the gain of the sale going to exceed the pain of all the work, the effort and the emotional ties you must break? Is burnout severe enough to prompt you to take what is realistic? Finally, if the buyer cannot see clear motivation from you, often they will not be willing to begin the buying process. Too many deals have fallen apart due to the seller not going the distance.