The joys of selling a business

Over the last nine months I've been looking at exit strategies from the IT support business and to say the process has left me scarred and bitter is an understatement.

When selling a business, the prospect buyer quite rightly wants some certain that wheat they are buying is what's been represented. For the seller, this means quite a bit of work. What's more it's quite reasonable for the buyer to require the vendor to spend some time helping with the transition to new owners.

So given the amount of work involved for the business owner, the sale price of the business needs to be worthwhile.

My experience was that the prices on offer weren't. I even had one prospective buyer claim they had just bought a 30 year old business with a turnover of 750,000 and gross of 180,000 for $18,000.

With those sort of numbers it was hardly worth selling.

I thought this was just me, that I really hadn't built a business that was worth anything. Fair enough, such is life and it's time to move on.

But then I started talking to others who've owned businesses and tried to sell them. I was surprised to find my experience was not unusual. Many people just walk.

So when I read a recent article on the Smart Company Blog about the under-representation of services businesses I couldn't help but add my two bob's worth.

This lead to this interesting reply from Andrew Kent at Biz Exchange. His view is the idea that these business are worthless is bunk.

I agree, all businesses have a value, but the market price for many businesses make it not worth selling for many business owners.

My suspicion is a service business needs to get over the two million dollar turnover threshold before it's attracts the attention of investors and serious buyers. Below that you are largely selling to people buying their own jobs or competitors who are at best half hearted about building a client base.

Andrew to his credit has decided to test this by making an offer on his blog: The first ten IT and construction business that approach him will get a free listing on Biz Exchange. It's an experiment I'll be watching with interest.