Relationship Between Asking Price and Businesses that Remain Unsold
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Question:
Is there a co-relationship between a business' asking price and how long it remains unsold?
Answer:
One would think that the seller would lower the price of a business that has been has been on the market for a while. Quite often this is the case, especially when a good business broker or other intermediary is involved. They will constantly measure the market and advise the seller that price reductions may be necessary to increase activity. As long as the seller is truly motivated to sell, price reductions will occur because ultimately the market NOT the seller determines the price. However, if the seller isn't motivated, it doesn't matter whether they are selling themselves or through a broker, they will maintain their inflated price and probably never sell the business.
This should not be confused with a business where the seller may be holding out for the right buyer. Also in specialty businesses where the buyer pool is not large the time to sale can be much longer.
You should also consider why a particular business hasn't sold. Surely price can be an issue. But a good business, with a solid history, clean books/records, and good future prospects will move very fast in today's market. Of course there are always exceptions, but if a business has been on the market for many months with no activity, the best comparison is to fresh fish: the longer it hangs around, the smellier it gets.
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Richard Parker author of: How To Buy A Good Business At A Great Price(TM), the most widely used reference resource and strategy guide for buying a business. He has purchased ten businesses in his career and has helped thousands of prospective buyers worldwide learn how to buy the right business for sale. He is also founder and President of Diomo Corporation - The Business Buyer Resource Center. Richard Parker is also the author of BizQuest's Business for Sale Blog |