Can I sell a business that is not making a profit?

Owners in this position often assume the answer is no, and quietly carry a business for another two years because they think there is nothing to sell. Sometimes that is right. Frequently it is not.

Businesses that lose money do sell. They just sell differently.

The price gets built from somewhere else

When a business earns, price is normally a multiple of normalised earnings. When it does not, that method has nothing to work with, so the price is assembled from what is actually there.

Tangible assets. Plant, vehicles, equipment and saleable stock at honest market value, less whatever finance is owing. Book values are routinely wrong in both directions and the buyer will get their own view, so it pays to know the real numbers before the conversation.

Contracts and pipeline. Forward work with real terms attached has value regardless of last year's result. So does a supply agreement, a preferred supplier position or an approved vendor status that took years to obtain.

Licences and accreditations. A QBCC licence held at the right class, a heavy vehicle accreditation, an approved training scope. These take time and money to obtain and a buyer avoiding that process is buying something real.

The customer base and the team. A trained crew who will stay, and customers who will still be there next year, are assets even when this year's profit says otherwise.

Strategic value. This is where the strongest prices come from. A competitor who can fold your business into theirs removes the duplicated rent, the duplicated admin, the duplicated management. Costs that make you unprofitable disappear on their books. The business is worth more to them than it is standing alone, and they can pay accordingly.

The buyer pool changes

A profitable business attracts owner operators looking to buy themselves a job and an income. That buyer cannot help you here, because there is no income to buy.

The realistic buyers are trade acquirers who want your capacity, your contracts or your geography, operators who believe they can run it better than it is being run, and buyers who specifically want the assets.

That is a smaller pool and it is not one you reach by placing an advertisement and waiting. It has to be worked directly, quietly and one at a time, which is exactly what a campaign should look like anyway.

Buyers price the reason, so know yours

There is a large difference between a business that lost money because a major customer left, and one that lost money because the market has structurally moved away from it.

A credible, evidenced explanation is worth money. "We lost our largest client in March, here is the revenue and margin bridge, here are the three new accounts we have won since" is a story a buyer can price. "Things have been tough" is not, and the buyer will fill the gap with the worst assumption available.

Have the numbers ready. Show the split between the one off and the ongoing. If there is a genuine turnaround underway, evidence it rather than assert it.

Three things worth doing first

Get one clean period on the board. A quarter, ideally two, showing the direction has changed. Buyers weight the trend heavily, and a rising line off a low base tells a completely different story to a flat line at the same level.

Separate the business from the owner's position. Frequently a business reads as unprofitable because of an owner's drawings, related party rent above market, or personal costs running through it. Normalise the accounts properly and some businesses that look like losses turn out to be modestly profitable. That is not creative accounting, it is presenting the business as a buyer would run it, and every add back needs documenting.

Get honest on the assets. Real market values, real payout figures, real stock that will actually sell rather than what is sitting in the system. Walking into a negotiation with numbers that do not survive inspection costs you more than the numbers were worth.

When the answer is genuinely no

Sometimes there is no buyer at a price worth the effort, and you deserve to hear that plainly rather than be signed up to a twelve month campaign that goes nowhere. In those cases an orderly wind down, an equipment sale or a negotiated exit from the lease can leave you in a better position than a long unsuccessful process would.

A market appraisal will tell you which situation you are in. It is free, it is confidential, and if the answer is that selling is not your best move, that is what you will be told.