6 Tricks for Selling a Dog That Doesn’t Hunt

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If you’ve ever sold an unprofitable business, you know that you are significantly disadvantaged.  One approach is to position the sale as the buyer’s alternative to going through the start-up process for a brand new business.  Here are 6 ways to position an unprofitable business for a sale.

1)      Having a state license, Medicare certification, and accreditation can get the buyer to market faster than going through the whole process.  Time is money.  Jumping through regulatory hoops can burn a year’s worth of rent, salaries, and foregone income.  Try to empirically quantify the costs they will forego by buying your business.

 2)      Take a hard look at assigning a value to staff replacement costs including recruitment, signing bonuses, moving costs, and training costs.  If you are selling a trained and ready workforce, it is worth something.

 3)      If you can justify a brand, quantify all the time and money that went into marketing activities to develop that brand.

Unbundle unprofitable businesses from profitable businesses when selling

 4)      If you are selling multiple businesses and only some are sustaining losses, then whether you carve the losers out as separate asset valuations will have a significant effect on overall price.  Unbundling the unprofitable businesses as separate asset valuations will reduce the drag on the profitable businesses.

If losses have been shrinking, you need to develop a projection.

 5)      Is the business a start-up for which the losses have been shrinking?  Investment bankers take unprofitable businesses public all the time in anticipation of profitability.  It is time to roll up your sleeves and put together a projection that projects the improving trends over a longer horizon.

 6)      Sometimes a few adjustments can create a profit on paper or at least get your closer to break-even. Are the losses attributed to a discretionary expense like owner compensation, related party transactions (i.e., real estate, captive insurance), product research, or product development?  Let’s adjust these in your projection.