In today’s seller-favored landscape of business transactions, if your business is not selling you are probably overpricing it. This issue is obviously seen and has become increasingly prevalent in today’s market, with various factors contributing to businesses being labeled as overpriced. In this article, we will delve into some key reasons as to why overpriced businesses struggle to sell.
Modern consumers are more informed than ever before, thanks to the wealth of information available at their fingertips. Buyers conduct thorough research, understanding market trends, financial standings, and comparable sales. An overpriced business stands out like a sore thumb to educated buyers who can quickly identify discrepancies between the asking price and the actual value. Informed buyers are less likely to “make an offer,” leading to a prolonged listing period or, in some cases, no sale at all.
Comparative Shopping on the Internet
The internet has revolutionized the way people shop, and this holds true for business acquisitions as well. Potential buyers can effortlessly compare prices, features, and the overall value of businesses in the same industry or niche. A business that is perceived as overpriced in the online marketplace will struggle to attract serious inquiries, as buyers can easily find alternatives with better value propositions. The transparency provided by the internet has made it imperative for sellers to understand the marketplace and price accordingly.
Aversion to Negotiation Negotiating
The sale of a business can be a delicate dance, and some buyers are averse to the process altogether. When a business is overpriced, negotiations become more challenging, and potential buyers may be discouraged from engaging in the conversation. Buyers prefer transparent and fair pricing. Therefore, an overpriced business may create an atmosphere of distrust, hindering the negotiation process and causing the process to never even start.
Fear of Offending Sellers
Buyers often tread carefully during the negotiation process, fearing that expressing concerns about the pricing may offend the sellers. This reluctance to discuss perceived overpricing can lead to a breakdown in communication and a failure to reach a mutually agreeable deal. Sellers who are open to constructive feedback and are willing to adjust their pricing strategy are more likely to engage in successful negotiations and ultimately close the deal.
Perception of Unreasonableness
The perception of a seller as being unreasonable or even delusional can stem from an overpriced listing. If a business is priced significantly higher than its market value, potential buyers may view the seller as unrealistic or out of touch with market realities. This perception can drive away serious buyers who are looking for fair and justifiable pricing. Sellers must carefully consider market trends to ensure that their asking price aligns with industry standards.
Drop in Sales: The Evidence is Clear
Statistics from Transworld Business Advisors indicate a clear correlation between overpricing and a failure to sell. When a business is priced more than 15% above its market value, the chances of a successful sale decrease significantly. This underscores the importance of accurately valuing a business, pricing it appropriately to attract potential buyers and facilitating a successful transaction process.
In conclusion, the primary reason businesses fail to sell is that they are overpriced. Educated buyers, the power of the internet, aversion to negotiation, fear of offending sellers, and the perception of unreasonableness are all factors that contribute to this dilemma. Again, buyers will not “just make an offer.” Sellers must carefully consider market dynamics, seek professional advice, and adopt a realistic pricing strategy to maximize their chances of a successful business sale in today’s competitive marketplace. Simply stated, if you are trying to sell, and have yet to, your business is most likely overpriced.
Andy Cagnetta owns and operates Transworld Business Advisors. He joined the company as a sales associate and later purchased it. Transworld is an international franchise business and franchise brokerage, with thousands of businesses for sale and over 200 franchisees in the United States and Internationally.
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