In the Supply and Demand equation, excessive supply means too much competition for buyers.
Competition for buyers is the third criteria for determining how fast you can exit and sell your business.
Rationally speaking, the higher the supply of businesses for sale (aka the competition for buyers), the longer it would take to sell your business and the more depressed prices will be, if all things being equal
This is not unlike the real estate market where the price sold and the time on the market is a direct reflection of the market's Supply and Demand.
However, real estate is a market that is more congruent to the Supply and Demand theory. Businesses less so.
Real estate properties are more homogenous than businesses. Businesses on the other hand are more differentiated and has the ability to evolve over time to become uniquely superior than its competitors, even if supply is abundant.
Still, most SME firms and businesses for sale are mediocre and becomes a part of the supply that offers no differentiation except for price. And if so, then the competition for buyers become intense, the price goes south and the time taken to sell far longer than necessary.
Buyers are always looking for good businesses and willing to pay decent and above market prices for it.
The supply of good businesses is surprisingly low. A good business does not have to be one that is making huge profits. It only has to be transformed, prepared and presented correctly for the purpose of a sale. This will cut through the competition for buyers.
In real estate, to make an 'ugly' house look good again may involve some clever staging and renovations, such as rendering the front of house, laying new carpets, landscaping and a new paint job. And suddenly the property is able to fetch higher prices and get sold faster.
However, the real estate agent is not responsible to do any renovations if you want to sell your house fast. You are.
This is the same for businesses. To reduce the competition for buyers, you'd need to transform, prepare and present your business properly for sale, then thus be seen as superior and rarer than the others for sale.
The only difference with a house is that the owner knows that a house knows that the house is dilapidated by a mere visual inspection, and hence comes to an easy acceptance that the only way to sell the house at the market price is to renovate the property, or take a big discount without an upgrade.
Business owners on the other hand are more likely to have an inflated perception of their business and in denial of what needs to be done to exit the business. It is not always easy for the business owner to see the truth about the need for business change, presentation and preparation.
Last updated: 18 December , 2018