It's never easy to sell a small business, and now that Hawai'i's economy has slowed down, business owners are finding it's even more difficult.

As the state's economy continues to tumble and business profits slide, the owners may not get what they hoped for their companies. Moreover, they could find it increasingly difficult to find a buyer.

This can be seen with businesses listed for sale through the Internet. Of the 28 Honolulu companies listed on bizbuysell.com, a leading Internet business marketplace, none was sold in the second quarter, said Mike Handelsman, bizbuysell.com general manager.

"It's currently not the best time (to sell), but that's globally speaking for a variety of reasons," said Steve Abdalla, president and principal broker of VR Mergers & Acquisitions-Hawaii.

"And buyer confidence is not great."

Nationally, only about 18 percent of all small businesses that are listed for sale are actually sold, according to the International Business Brokers Association. Of those that are sold, less than 10 percent of the sellers receive what they were asking for, the association said.

During tough economic times, selling a business is even more difficult because buyers have a hard time getting financing and money is generally scarce. Throw in rising lease rents that are typically negotiated separately from the business sale price and the total price tag could be out of reach for many.

Richard Dole, principal of the local private equity investment banking firm Dole Capital LLC, said a poor economy affects business sales as much as it does any other major transaction.

"Just like any other type of investment, when you have a strong economy, profits are good. That would be a good time to sell," Dole said. Dole also is a business broker and his firm does business appraisals.

Dole said a business on the decline also isn't very attractive to prospective buyers, even though a seller may have dropped the asking price to lure a buyer.

"It's really hard to attract a buyer because people who buy the business need to make a living from the business itself," Dole said. "So the cash flow has to be sufficient to not only provide the buyer with a salary or compensation, but has to be able to service any debt used to acquire the business and to grow the business and remain competitive."

Abdalla said his firm has come up with 20 factors that must be met for an owner to sell a business at maximum value. The factors include favorable market conditions and timing.

Abdalla said one mistake many business owners make is they don't prepare their companies to be sold. He said it often takes years of planning to position a business to be put on the sales block and owners need to have clean financial records that show at least three years of solid earnings.

But Abdalla said at least a third of all small businesses don't keep adequate books and can't prove the maximum value of the business. He said many businesses don't sell because of problems that have little to do with the product or service provided by the business.

"The primary reasons they don't sell is lack of profitability, lack of good books and records, and unrealistic expectations. That probably accounts for 70 percent of the ones that don't sell," Abdalla said.

He said not all industries are affected by the current slumping economy. Abdalla said information and technology firms, as well as security companies, are "hot" sellers. But on average, he said, "you're not going to get as much money."

ONE COUPLE'S STRUGGLE

Jared and Eva Ikeda know how difficult it is to sell a business.

The owners of The Peanut Shop and Moiliili Mochi & Candies put the business up for sale after they couldn't come to terms on a new lease for their Liliha shop. But the Ikedas were unable to find a buyer and decided to shut down on Wednesday.

The couple bought the peanut business in 1985 and the mochi store a year later, and consolidated the two under one company. Admittedly, Jared Ikeda said the unusual combination was a big obstacle in selling the business because the two ventures were so different.

He said another issue was that without a lease, it would have cost a new owner thousands of dollars to move the two operations and their equipment to a new location. In these tough times, Ikeda said, there wasn't much interest in doing that.

"We had some calls, but nothing really materialized," he said.

But as the shutdown approached, Ikeda said he was willing to drop his demand to sell the two businesses as one and reached a tentative agreement to sell the peanut portion of the business. He did not want to name the buyer, but said she is a longtime customer of his.

Ikeda added that he will receive "close to his asking price," which he did not want to reveal. Still, he said, he will likely take a financial hit if he is unable to sell the other half of his business.

"It was difficult to try and split it up because I wanted to try and keep everything intact," he said. "But as it got closer, we felt the best way to do it was to split it up because people were interested in certain things, but they weren't willing to spend the money and buy all of it."

NEW-OWNER OBSTACLES

Another major obstacle to selling a small business can be the owner itself. Richard Dole said often the success of a business is linked more to the operator than the company or its products and services.

"If that could be cloned to somebody else, that would be great, but that's not always the case," he said. "So many of the ones that actually sell don't always work out.

"Selling a small operating business is probably one of the least desirable options someone would want to consider."

Wil Cordes was willing to take that chance when he bought the landmark Forty Niner restaurant in 'Aiea. The tiny saimin and hamburger stand had been in the Chagami family for 59 years until its 89-year-old co-founder decided to retire.

Cordes, who also operates the cafe at the Bishop Museum, spent four months upgrading the diner. He added tables, improved the kitchen (the old setup allowed only one saimin order to be made at a time), and added breakfast and dinner hours.

The previous owner gave Cordes the recipes for the popular saimin dashi (soup base) and hamburgers, and he made only minor changes to the appearance of the restaurant. But Cordes knew that regardless of how hard he tried to retain the look and flavor of the diner, longtime customers would know that the Chagamis no longer owned the restaurant and he would struggle.

"I told the original owners that no matter what we do, the beginning is going to be difficult because the hamburgers are going to be made by the same people, same ingredients, but people are going to come in and still think that it's different," he said. "It was a process that we went through, knowing that (the customers) had to keep trying until finally they say, 'It's exactly how it was before.' But we got there. I'm happy about that."

One of the best moves he made was to rehire many of the employees who made the Forty Niner what it was before Cordes took over. He also hired his 12-year-old daughter to help out.

"It's a family atmosphere," he said. "Everybody has known each other there for so long and everyone gets along really good. It's just like eating at home."