My business is losing money but could make a good profit under a new owner – can I still sell my company?

How to Sell a Business That Is Losing Money

If your business is currently unprofitable, you might wonder whether it’s possible to sell it. Whether you want to find a buyer because you believe the business has potential under new ownership, you're ready to step away from the responsibilities of ownership, or you're looking to cash out what’s left of the business’s value, selling a failing business is still a viable option.

Can I Sell a Failing Business?

The first step in selling a struggling business is understanding its financial situation, particularly distinguishing between a solvent and an insolvent business. You can use tools like the cash flow test and balance sheet test to assess your company’s financial health.

• Cash Flow Test for Insolvency: This test examines whether the business has enough cash to cover its liabilities and pay creditors. If the business can't meet its financial obligations on time, it could be cash flow insolvent.

• Balance Sheet Test for Insolvency: This involves comparing the business’s debt to its assets. If the debts exceed the value of assets, the business is considered balance sheet insolvent, meaning it owes more than it owns.

If your business is insolvent, you must stop trading immediately to prevent further deterioration of its financial position. As the business owner, you must act in the best interests of creditors. Seeking advice from a licensed insolvency practitioner is essential. They can help you explore options to raise funds to pay creditors, potentially involving selling assets or parts of the business to help rescue the company.

If your business is solvent but struggling, a small cash infusion, expert guidance, or a committed new owner could help turn things around. In such cases, finding a buyer who can continue operating the business may be the best path forward.

Finding a Buyer for a Struggling Business

Businesses often face challenges like difficult market conditions, labour shortages, supply chain disruptions, and material shortages. These issues were further complicated by the Covid-19 pandemic, the war in Ukraine, and Brexit's aftermath. If your business is no longer profitable due to these factors, you’ll need to provide a clear picture of your business's financial health when negotiating with potential buyers.

A going concern refers to a business that, despite past financial struggles, is forecasted to continue operating and meet its obligations in the foreseeable future, without the imminent threat of insolvency or liquidation within the next year.

During the sale process, due diligence will play a key role in identifying any issues that could affect the sale, such as poor cash flow or legal complications like County Court Judgments (CCJs) or Winding Up Petitions.

There are buyers on the market who specialise in acquiring underperforming businesses with potential, seeing them as opportunities for turnaround projects.

How CBS Business Sales Can Help

At CBS Business Sales, our experienced team of business brokers and in-house business valuers specialise in selling and valuing unprofitable businesses. We’ll work with you to determine the current value of your business, taking into account both assets and liabilities, to set a realistic sale price.

If you're looking to sell a failing business, schedule a free consultation with our team to learn more about your options.