Entrepreneurs are often delusional.
Some entrepreneurs labor excessively on businesses that are money losers, working against the odds. When they are finally exhausted in frustration, they decide to sell the business.
Now it's possible that some sucker out there will be equally delusional and buy the business. But the reality is that the business may simply be unsellable.
So how do you recognize an unsellable business?
In this article, we discuss some of the red flags that might suggest that it may not be possible to sell a business.
Lack of Transferability to a New Owner
In some cases, the owner is the business and the business is the owner. If the selling owner is out of the picture, there is no viable business. Can a new owner step in, replace the previous owner, and make enough money to make it worthwhile? If not, the business is unsellable.
No Chance of Profitability
If the amount of money that comes out of the business doesn't justify the amount of time and money that needs to go into the business, it's possible that the business is a permanent loser. While it's true that new business owners can turnaround a money-losing operation, it's also quite common for some businesses to never get into the black. If it looks like it will be very difficult and highly improbable that a successful turnaround can be executed, the business may be unsellable.
Ticking Time Bombs
Some businesses have albatrosses around their necks that will scare away any prospective buyer. That could be a huge competitor who is entering the market. It could be a lawsuit or regulatory problem. While there are legal ways to protect the new owner from some time bombs, none is full-proof. As a result, businesses with big problems may be unsellable.
Easy to Replicate
Finally, a business may be unsellable if it can be replicated for less money than it costs to buy the business. Why buy the company when you could do the same thing for less money with equal or better results? These undifferentiated businesses with no barriers to entry are often unsellable.