Can You Sell a Business That is Losing Money?
Selling a business can be tricky enough, and the process is made even more complicated if the company is losing money.
But is it possible to sell a business that’s losing money?
The short answer is yes—but there are caveats. Let’s take a closer look.
Why Is The Business Losing Money?
One of the first things you’ll want to consider is why it’s losing money in the first place. If the cause of the losses is something that can be remedied, such as lack of marketing or insufficient staffing, then you may have some luck implementing these changes and explaining to a buyer why these simple changes are going to result in your business producing a profit.
Alternatively, look for one-time events. These are expenses that happened, are unlikely to happen again, and are easily explained to a buyer. As a seller, we often add those back. Example of these can be hurricanes, business shut downs related to switching CRM systems, or a bad batch of glue causing your cartons to fall apart.
On the other hand, if the causes are more structural—for example, declining demand for your product or service—then you may be stuck with losses no matter what you do.
Do You Have a Brand?
Even if your business is losing money, you might have brands that are very valuable.
Sell Assets!
It’s also important to remember that buyers of businesses tend to prefer companies that are already making money rather than ones that are still trying to get out of the red. This means that if you’re looking to sell your company while its still losing money, you may have difficulty finding buyers willing to pay full price (if at all). That said, if you need to get rid of your business quickly and don’t care too much about how much money you make off of it, then it might make sense to take whatever offer comes along and move on.
Finally, keep in mind that potential buyers will want access to all financial records related to your business before they commit—so make sure these are up-to-date and readily available. It’s also important to note that any sale involving a company with losses will likely require more due diligence than usual in order for potential buyers to ensure they know exactly what they’re getting into.
Selling a business that’s currently losing money isn’t impossible—but it does present certain challenges. If possible, try and remedy some of the underlying issues causing these losses before putting your company up for sale; this will not only increase its value but also make it easier for potential buyers to assess whether or not an investment makes sense for them. Ultimately though, whether or not selling a losing business makes sense depends on your individual circumstances and goals — so take some time and weigh your options carefully before making any decisions! Good luck!
