BizBuySell, the largest online market for selling small businesses in the US reports that roughly 70% of small businesses fail to sell when they try to put themselves on the market. Investmentbank.com agrees; only 30% to 40% of businesses offered for sale actual sell. The senior care industry is no different. The home care and home health industry faces increased competition in 2025. Increased competition may force smaller operations to exit the market. The excess supply of agencies for sale makes it more difficult to successfully sell an operation.
Here are the top 5 reasons we believe senior care operations fail to sell once put on the market:
Overpriced or Unrealistic Expectations
The most probable selling price (MPSP) is set by the market, not by the Seller. Offering a selling price substantially above the MPSP (i) attracts fewer serious buyers, and (ii) the offering usually sits on the market a long time. The longer the offer sits on the market, the more suspect buyers become about the deal (e.g., something must be wrong with this deal). Some Sellers erroneously believe that they can offer their deal at a high price and then later reduce the price during negotiations. Unfortunately, the statistics show that such an approach does not work.
Poor Financial Performance and Cash Flow
Declining sales, a poor profitability record, or both can kill a deal. Buyers tend to believe that past performance is a strong indicator of future performance. Buyers generally believe deals with poor track records are risky. Without substantial concessions, most Buyers will balk at the deal.
Seller or Buyer is Difficult to Work With
Selling a business is more than just selling the assets or the securities. It includes a transfer of knowledge and know-how. And trust. If the Seller and Buyer have difficulty communicating or trusting each other, the deal is doomed.
Fail Due Diligence Review
Many transactions never successfully complete due diligence. Due diligence usually occurs after the parties sign an asset purchase agreement. During due diligence review, the Buyer verifies the information the Seller shared in the Confidential Information Memorandum (e.g., financial statements, licenses, business practices, client demographics, legal compliance). Many things can kill a deal in due diligence: bank statements do not verify the financial statements, sales details review severe client concentration or poor sales diversity, expenses misclassified reveal more cost in the operation than accounted for, state inspection reports reveal serious compliance issues, other material facts arise which question to attractiveness of the deal (a major contract is expiring).
Transaction Fails to Satisfy These 3 Buyer Must-Haves
Most Buyers require a minimum of these 3 things: (1) earn a reasonable salary, (2) generate sufficient cash flow from operations to pay for the bank loan the Buyer took out to buy the operation, and (3) generate a reasonable return on invested capital (i.e., downpayment) the Buyer made to purchase the business. From the Buyer's perspective, if the transaction does not meet these minimum requirements, the Buyer may be better off getting a job, not incurring bank debt, and investing in the stock market.
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