Most Small Businesses Are Never Sold. They Are Closed.

The demographic arithmetic is well known: a substantial share of small and mid-sized firms across developed economies are owned by people within a decade of retirement, and only a minority of them have a successor identified. What is less discussed is what actually happens to the rest. A few are bought by competitors or by search funds. Some pass, with difficulty, to family. A great many are simply wound down — the equipment sold, the lease surrendered, the customers dispersed — with the owner recovering a fraction of what a going concern would have fetched, and the jobs disappearing with it. Owners tend to assume the obstacle is price or the state of the market. Brokers and lenders describe a different pattern. The businesses that fail to sell are usually profitable but not transferable: the customer relationships are the owner's personal relationships; the pricing lives in the owner's head; the processes are undocumented; the accounts are kept for tax rather than to show how the business actually makes money; and the owner cannot leave for a fortnight without the phone ringing. A buyer, or a lender financing one, looks at that and sees a job with a purchase price attached, not an asset. The remedy is not glamorous and it takes years, which is why it is worth starting long before the exit is imminent. Written processes; a second person who can quote, sell and hire; contracts in the company's name rather than the owner's; three years of clean, explainable accounts; and evidence that the business runs while the owner is on holiday. Each of these raises the price, widens the pool of possible buyers, and — not incidentally — makes the business better to own in the meantime. Marketplaces and brokers for small-company sales have made it far easier to find a counterparty than it was a decade ago. They cannot make a business transferable; only the owner can do that, and the earlier it starts, the more the eventual listing is a sale rather than a liquidation with a nicer name.