This is an old Wall Street saying that advises investors not to be greedy. It can happen when chasing performance in hot sectors, e.g., buying stock in a company that has become overvalued or when an investor’s expectations of a stock are inflated. Maybe the recent rise of the stock price outperformed the market by a wide margin and an investor assumes that the price will continues upward. The investor continues to hold onto his entire stake rather than sell portions of his position at set intervals.

Sometimes similar things can be said of business owners. According to business brokerage industry statistics, 80% of businesses that are put up for sale are not sold successfully. Price is usually the reason that a sale does not take place. The price may be excessive due to several reasons. Some of the main reasons are:

Emotional investment

Many owners have made strong emotional investments in their companies. They have put their blood, sweat and tears into making the company a success and that has to be worth something! Unfortunately, a buyer is not going to care about the sweat equity that you’ve invested. As a seller, you need to view your company objectively. The best way to do this is to think like your potential buyers. What are some of the flaws or shortcomings of your company? What needs to be fixed? Don’t give potential buyers a reason to lower the asking price.

Retirement needs

Most people have an idea as to the size of the nest egg they will need in retirement. Unfortunately, for many owners, their main retirement asset is their business. They need to sell for a certain price so that they can retire as they hoped. What happens when there is a gap between what a buyer is willing to pay and what the owner needs in retirement? That’s right – no sale. If there is a gap between what your retirement needs and the value of your business, then lay out a road map of how you are going to add value to your business over time to close the gap.

Sell for top dollar

Many owners are looking to sell the company for its absolute peak value. This is often referred to as “taking every last dollar off of the table.” One problem, when exactly is the peak? Just like in the stock market or real estate market, you usually don’t know when the peak occurs until several months after it happens. Can a buyer justify the diminished financial return that will result from the increased purchase price?

In future posts, I will discuss some of the other reasons why successful business sales don’t take place. In the mean time, I would like to leave you with something a friend of mine at a mergers and acquisitions firm mentioned. It is a quote from Baron Rothschild. When asked about how he made his fortune, Rothschild’s reply was simple but elegant, “Because I sold too early.”

Ed Baloga, Principal CFO of Baloga Associates, is a New York tri-state area based small business advisor offering part-time/interim chief financial officer services to growth and entrepreneurial companies. He can be reached at ebaloga@baloga-associates.com and followed on Twitter @edbaloga.