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“Can you sell a loss making business?” is a question I was asked recently.

And of course the answer is yes!

There could be many reasons why someone would want to buy that business, for example:

• It has patents that another company could use or develop to make profits with
• The company order book has plenty of orders another company could fulfil
• It has a customer list that another business wants to get to
• It has physical assets that can be used or sold to make profits
• It has intellectual rights to material (video, audio, printed works) that can be used to profit from

If the business goes down without being sold the likelihood of anyone else getting exclusive use of any asset is minimal.

Obviously there is the possibility of buying it or bits of it from a receiver. However, their interest is in getting the maximum amount of money from the sale of the whole business or its assets and you’re unlikely to get it at a good price.

Although you can buy a loss making business you really need to understand why it’s got into a loss-making state.

Causes can include:

• poor management
• poor quality products or services
• poorly forecast and over optimistic cashflow forecasts
• excessive returns
• no innovations in product or service
• unqualified and/or unmotivated  staff

Once you understand the issue(s) then you can decide whether to buy the business as an ongoing enterprise or simply to make an offer for a chunk of it or for an asset you think would help you business.

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