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How To Sell An Unprofitable Business

By: Jason Markum

How To Sell An Unprofitable Business

We’ve all been there! You worked your tail off for years, you put your heart and soul and everything else you had into building a business but it just didn’t work out. Sure the company makes money, and you’re able to meet payroll most of the time, but as far as being profitable… well that’s another matter.

And you finally made the decision, it’s time to get out.

So how exactly do you sell an unprofitable business? Believe it or not, even a company that doesn’t make a profit, still has value and is worth money to the right people. In this article I’m going to discuss several ways to sell an unprofitable business that you may not have thought about.

In my mind there are basically for potential ways to sell a company that is losing money.

The first way to sell an unprofitable business is to look for a large publicly traded company. I’m talking about companies who’s stock trades on the New York Stock Exchange or the NASDAQ. Look for a company that closely mirrors the industry that you are in or one that has a specific need for what your company offers. These companies often have large sums of money at their disposal, as well as stock in their own company to use as incentives. Just because your company is not profitable, doesn’t mean it would be unprofitable for them. Often economies of scale allow large companies to turn a profit when a small company would not.

The next way to sell an unprofitable businesses is to look for entrepreneurs. People who like to buy and run companies often have a higher risk tolerance. Look for an entrepreneur with experience in your specific market or industry. Why would an entrepreneur buy your money-losing business? Because many times it is cheaper to buy an existing business that is to start one from scratch. And as an entrepreneur, they may have ideas that you’ve never thought of to turn the business around… that’s what they do.

The next way to sell an unprofitable business is to consider the company’s current management. Sure, you were the owner, but have you been running things on a day-to-day basis? There’s a good chance that you had a management team in place, and those managers may want to buy the company from you. Current management can always find venture capital for seed money if necessary.

The fourth and last way to sell an unprofitable business is to look for foreign companies. Many times foreign companies are just looking to get in the front door in a particular US market. They just want a toehold in America, and you can give them one! There may be additional hurdles for this technique if your company is a technology company, in which case the US government may need to sign off on your sale to a foreign company. But if your company doesn’t deal in technology or another strategic industry, selling to a foreign company may be just the thing.

So there you have it four ways to sell an unprofitable business! Whichever way you choose, the next step is to quietly send out test balloons, that is, send out feelers to whichever group you’ve decided to approach. Look at it from the potential buyers point of view, and be ready to show them exactly why your company makes sense from their point of view and you will be just fine.

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