Selling A Business When It’s In Trouble

Not all businesses succeed.  For every success story, there are many more stories of failures, and the failure can happen for almost any reason.  There are also stories of businesses that found success, only to encounter difficulties later on.  Businesses like these may find themselves in a position where they would rather sell than stand by while the ship sinks.

Can distressed businesses be sold?  Is there a market for distressed businesses?  Provided the business is viable and can remain a going concern through the sale process, the answer is yes – as long as the business owner is willing to either accept the fact that the value the business based on its current condition may not be as high as they’d like it to be, or alternatively, is willing to take the necessary steps to improve the business and thus increase its sale value.

Accurately pricing a distressed business is the domain of an experienced professional business broker, one that knows how to use the tools and techniques at their disposal to identify both the weak and strong points of the business in order to arrive at a valuation that closely conforms to market conditions and expectations.

If the business owner is open to the idea, a professional business broker will also be in the best position to suggest steps the business can take to minimize its weak points and shore up its good points, which can go a long way towards increasing the value of the business to prospective buyers.

While the manager or owner/managers of a troubled company may be in the position of decision-maker in the sale, this is not always the case.  The business broker will need to become acquainted with all parties involved in the business in order to determine which party is the real decision-maker in the sale process.  The business broker will then ensure they are the primary party involved in the sale process.

If the business is on the cusp of bankruptcy, a sale usually proceeds faster, cheaper and more privately – although there is less protection for the parties concerned.  If the business has already fallen into bankruptcy, the sale will proceed more slowly, be more expensive, and it will also be public – but there are benefits in the form of greater protection for the concerned parties, an automatic stay, and there is a forum for addressing related issues.

Above all else, the main hurdles to overcome in the sale process of a distressed business are twofold.  One is to make clear headed decisions and not let emotions get the best of the parties involved.  The other is dealing with time constraints, which can further exacerbate feelings of panic.  A good business broker will be able to keep these challenges in mind throughout the process, properly dividing up the steps each party needs to take based on their role in the process and effectively managing the activities of each party as needed.

With a steady hand, attention to detail, hard work and a clear-headed approach, a good business broker can meet the challenges of selling a distressed business, and the business can be sold for a value which is satisfactory to all parties involved.

Sources:

http://www.krbrokers.com/site/wp-content/themes/krbrokers/articles/sellingyourbusiness/Selling%20a%20Troubled%20Business.pdf

http://ml-sf.com/publications/docs/TPL0804-Litteneker_McNutt.pdf