Closed Deal Case Study: Unrealistic Expectations of Business Value
Challenge: Business owner neglect led to a significant revenue decline without understanding the impact on the business value
A business owner that sold home décor contacted The Vant Group (TVG) to sell their business. The business was over 10 years old and the owner was becoming distracted by other life ventures. Due to this, they started to lose interest in the business and revenues began to decline. Eventually, it dropped to 25% of previous revenue, and the decision was made that it was time to sell. The owner’s expectations of the business value were based on the profitability of the business when it was in its prime. Unfortunately, the value of the business was now significantly less than had it sold before the decline in revenue. After understanding their current value with a valuation of the business, they chose not to market the business for sale and hold on to it.
Approach: Value is set by what the buyer is willing to pay
A year later, TVG received an email from a buyer that was looking for a type of business with very specific criteria. The profile fit the home décor business and TVG contacted the owner of the business to ask if they would be interested in talking with this buyer. Unfortunately, they had allowed revenues and profits to decline even further during that year. The buyer put in a Letter of Intent and the seller countered. The buyer was not willing to pay what the counter offer proposed as the seller was still unrealistic about the current value of the business. Many months went by and finally, the buyer decided to give another offer. There were several months of back and forth on the offer. Eventually, the seller had decided to move from Texas to another state. The seller realized that they needed to sell the business before they moved. At this point, the seller became realistic about the offer they had received. Though they had not put their business up for sale and had let their business decline, fortunately, they contacted TVG and allowed this guidance to provide an offer through the TVG connections.
Result: Closed in one month after terms were agreed upon
The seller now needed a quick sale and realized that the deal terms and purchase price offered by the buyer were their best options. The buyer and seller settled on a final purchase price, terms of the sale which included a consulting agreement and future earnings, and which inventory items would be included in the purchase. Luckily, they were able to sell their business within a few weeks of selling their residential home in Texas and make a clean break to their new state destination. Without the help of TVG, they would have never sold their business, and it would have died a slow death. Now, their original designs and home décor items have been placed in willing and capable hands. They will also be able to see the business they founded gain back the level of recognition and profitability it had once known with the goal of even greater growth.