"Have you ever sold (fill in the blank niche business type with impossibly unique characteristics here) a business before?"

I used to dislike this question. Today, I welcome it as an opportunity to engage proactively with clients and prospects and sometimes weed out those who might be difficult later.

The real answer is complex. On one level, the answer can be "yes," while on another level, it can be "no." Exploring these nuances could be the subject of an 8-year degree program. The truth is that, generally, it doesn't matter (with some exceptions), and this is likely not the actual question a prospect or client is asking.

First, let's look at the actual question:

Businesses are classified according to NAICS codes. There are a total of 1,057 NAICS (North American Industry Classification System) codes. These codes are structured hierarchically into 20 sectors, which are further divided into subsectors, industry groups, industries, and U.S. industries. We never know what's going to walk through the door.

Compound this by the fact that businesses often operate in more than one NAICS classification. An restaurant for example, may be both a full service restaurant and a bar. It may have a roller skating rink attached to it, and it may sell t-shirts or even furniture (think Cracker Barrel).

To calculate the number of possible combinations of NAICS codes when a business can operate in two or more NAICS codes at the same time, we can use combinatorial mathematics. Specifically, we need to calculate the combinations for each possible number of codes a business might operate in, from 2 up to 1,057.

The total number of combinations can be expressed as the sum of combinations:

Where

is the binomial coefficient representing the number of ways to choose k items from n items without regard to order.

This equals approximately 1.544×10^³⁰⁰. However, we also need to account for the 1,057 classifications where only one NAICS code applies.

Thus, the probability that any business broker, firm, M&A advisor, or even the entire universe of living representatives of that community has encountered every possible combination is effectively zero.

With few exceptions, the question is about as relevant as asking a batter from the Red Socks if he's swung at every possible pitch from every possible pitcher. A professional works within the rules of the game, the statistics and conditions served by the market, and steps into the box.

Like a batting average for a professional baseball player, business brokers and M&A advisors are never batting 1000. It's impossible.

National statistics show that only 20% to 30% of businesses that are put up for sale actually get sold. This means that up to 80% of businesses on the market do not find buyers.

Several factors contribute to this low success rate, including unrealistic pricing, poor financial records, and inadequate preparation for sale (Worldwide Business Brokers) (Certified Exit Planning Advisor). Addressing these issues can significantly improve the chances of a successful sale.

A good broker knows this and will be working with his or her clients to maximize the potential for success. The system they use to minimize the risk factors that lead to a failed transaction and maximize the probability for success is worth real money! I would argue this is infinitely more important that whether an advisor has sold a business exactly like the one a client or prospect is asking about.

Next, let's talk about what the prospect or client is really communicating.

It's possible that they don't know our business and are innocently asking the question at face value. It can make logical sense to someone who believes their business is unique (e.g. nearly every business owner), and/or believes that a business can only be sold if the firm selling it has deep subject matter expertise in the business model and vocabulary of that business ecosystem.

It's more likely that there is something about the approach we're using that doesn't sit right with them. They may be probing our ability to get the job done or they may be mounting a passive aggresive argument against the idea of doing a lot of things to prepare and package their business that they've never had to do before.

I see this line of questioning from business owners who may have never maintained a balance sheet, for example. They might see performance metrics showing up that we understand represent working capital, the efficiency with which inventory is managed, what excess inventory means, etc, but they always just made it work. This type of seller can benefit from a discussion around how we can make apples to apples comparisons and how we calculate the way their business measures up to competitors already on the market or previously sold.

There are examples where some business models either require knowledge of a language model or behave in a way that runs counter-intuitive to the way other businesses sell. Every industry has it's unique qualities. We don't want to diminish this fact or say that every business is the same as every other business. That would be foolish.

However, there are fundamentals that don't change. Getting to realistic pricing, assembling and analyzing good books and records, and preparing a business (and it's owner) for sale, for example, are universal. Good advisors have access to resources that can fill in the blanks for each new case.

At the end of the day, buyers want the best possible price for the business they built. They want someone in their corner that understands the ebbs and flows of business sales negotiation, has the systems and network in place to manage issues that can come up, and the resourcefulness and creativity to get the job done.

In the world of business brokerage and M&A, just like in baseball, success isn't about swinging at every pitch—it's about making each swing count. And a skilled broker knows how to step up to the plate and hit it out of the park for their clients.