One of the main reasons businesses struggle to sell is that they are priced too high. Educated buyers, the influence of the internet, reluctance to negotiate, fear of offending sellers, and the perception of seller unreasonableness all play a role in this issue. Buyers typically won’t “just make an offer.” A skilled broker assists sellers in thoroughly evaluating market conditions and providing expert advice, enabling them to implement a realistic pricing strategy to enhance their chances of a successful sale in the current market. In simple terms, if you’re trying to sell your business and haven’t succeeded yet, it’s likely that your asking price is too high.
Six reasons why overpricing your business may keep buyers away.
Knowledgable Buyers
Today’s consumers are more knowledgeable than ever, empowered by the vast amount of information at their disposal. Buyers engage in extensive research, gaining insights into market trends, financial positions, and comparable sales. An overpriced business becomes glaringly obvious to savvy buyers, who can easily spot inconsistencies between the asking price and its true worth. Well-informed buyers are less inclined to “make an offer,” which can result in longer listing periods or even no sale at all.
Comparative Shopping Online
The internet has transformed how people shop, and this applies to business acquisitions too. Buyers can easily compare prices, features, and overall value of businesses within the same industry or niche. A business viewed as overpriced online will likely face challenges in attracting serious inquiries, as buyers can quickly discover alternatives with more appealing value propositions. This level of transparency necessitates that sellers grasp the marketplace dynamics and set competitive prices.
Aversion to Negotiation
Negotiating a business sale can be a nuanced process, and some buyers may shy away from it entirely. When a business is priced too high, negotiations can become difficult, potentially deterring interested buyers from entering discussions. Buyers tend to favor clear and reasonable pricing. Consequently, an overpriced business can foster distrust, obstructing the negotiation process or preventing it from even beginning.
Fear of Upsetting Sellers
Buyers typically approach the negotiation process cautiously, worried that voicing concerns about pricing might upset sellers. This hesitation to address perceived overpricing can result in poor communication and hinder the possibility of reaching a mutually beneficial agreement. Sellers who welcome constructive feedback and are prepared to modify their pricing strategies are more likely to have successful negotiations and ultimately secure the deal.
Seller is Perceived as Unreasonable
When a seller is perceived as unreasonable, it often originates from an overpriced listing. If a business is listed at a price significantly above its market value, potential buyers may see the seller as unrealistic or disconnected from market conditions. This perception can deter serious buyers seeking fair and justifiable prices and may raise doubts about the seller’s claims regarding other aspects of the opportunity, such as earnings.
The Proof is Convincing
Statistics show a strong link between overpricing and unsuccessful sales. When a business is priced more than 15% above its market value, the likelihood of a successful sale drops considerably. This highlights the need for accurate business valuation, setting the right price to appeal to potential buyers and ensuring a smooth transaction process.
Thinking about selling your business? Reach out to Dave DeCamella, the Tampa Business Broker, for a complimentary business valuation. This crucial step will help ensure a successful and seamless transition in the sale of your business.