Honesty About A Sinking Ship: Fix It Or Disclose It

No matter what you’re selling, it becomes exponentially more difficult to sell something that is broken than something in proper working order. It should also go without saying that it is very unethical to try and pretend a broken thing works when trying to sell it to another person.


These basic sales truths hold true in the small business market as well. If your business is a sinking ship that you are trying to escape from – you have only two options. Fix it, or disclose it.


What do we mean by this?


Let’s say your business owes an enormous amount of money to vendors or the IRS. You might think you have to hide ugly debt and pass the buck onto the next owner, but it won’t work. It will absolutely come out during the due diligence process. Your choices here are to pay the debt, or (if paying the debt is impossible) be upfront with prospective buyers about how much money the business owes. You might be surprised that for the right business opportunity buyers may be willing to deal with the debt in order to buy your business. If you try to go the other route and hide the issue, your deal will absolutely fall apart.


What if you have a ton of broken equipment? It might seem silly to spend a ton of money upgrading equipment you aren’t personally going to use, but if you were selling a house you’d probably paint and fix broken fixtures or doors. The same holds true for a business. Think of upgrades before selling as a way to strengthen the price of the business. A buyer isn’t going to pay top dollar for broken stuff, but they might if everything is working and/or new. Don’t take the chance and try to conceal broken equipment – you’d better believe buyers are going to figure it out and come after you.


These are just two examples, but there are many more skeletons that can lurk inside of small businesses. The message here is you absolutely, positively must be honest and upfront about why you are selling and what is wrong in your business. Problems aren’t necessarily the kiss of death for business deals, they are simply just points of negotiation. Hiding problems, on the other hand, will mean your business will never sell.


Are you thinking about selling but are worried about what buyers might find? Do you think the flaws in your business are deal-killers? Would you like to know more about how to turn flaws into negotiation points? Please feel free to leave any questions or comments here and we would be happy to help.




Michael Monnot

12995 South Cleveland Avenue, Suite 249
Fort Myers, FL 33907


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Michael Monnot


5111-E Ocean Blvd
Siesta Key, FL 34242

Michael Monnot


9040 Town Center Parkway
Lakewood Ranch, FL 34202


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