How to Sell Your Business Post the COVID-19 Pandemic
Many business owners who wanted to sell their businesses and retire had to stall their plans due to the Covid-19 pandemic. They were worried that they would not get their desired price for the next few years. But now that vaccines for coronavirus have started rolling out, business owners are considering putting their company in the market again.
The truth is, investors with capital were looking for investment opportunities, even during the Covid-19 pandemic. Even though more than 80% of advisors expected business valuations to decline in 2020, they cannot deny that the effects of the pandemic on each industry were different.
Most of these advisors recognize that the post-pandemic market will be a seller’s market for mid-level businesses with valuations between $2 million and $5 million. Many business valuations have also grown during the pandemic, especially for industries like delivery, eCommerce, education, and other sectors that can operate through online stores.
But selling some businesses would indeed be more challenging, especially those that had to halt or reduce their operations due to the pandemic. However, such business owners can also hope to recover and position themselves for sale in 2021. These are some of the tips for those owners who wish to sell their businesses in the new year.
Most business owners sell their businesses to retire and enjoy their life. Some others do it because they feel burnt out or start facing health issues due to the pressure. Many elderly business owners who suffered losses during the pandemic want to sell their businesses as they do not want to put in their time and energy to rebuild their business.
So if your business has been struggling since the pandemic started and you do not wish to input any more time or resources, it is better that you sell it now. It might save you from spending too much of your personal assets trying to recover your business position.
But if you feel that you have what it takes to renew your business, you can wait and watch if the valuation grows in 2021. It is best to consult an advisor or a business broker to know your company’s correct value in the current market.
Clean up Your Finances
Many entrepreneurs had to treat their businesses like a piggy bank and run some personal expenses that might pass through the IRS. If your company has been struggling in the pandemic, you might have had to do the same. However, make sure that you clean up your finances before you try to sell your business.
Work with your CPA to sort out your books so that you can show your real profits to a buyer. Even after you have decided to sell your business, the entire process can take between 6 to 12 months. Therefore the sooner you get on with setting your finances straight, the better your chances are to attract a buyer.
Identify the Risk Factors
Even before the pandemic started, your business might have had risk factors that could stall the sale. The market situation during the pandemic might have aggravated these risks or added on a few more. Therefore, make sure you analyze every aspect of your business to identify these risk factors, such as overdue litigations, inventory mismanagement, low-profit margins, or outdated employee safety practices.
Once you have identified and rectified these risks, you will be able to justify your asking price. It will also help you with a smooth transition of your business to the new owner. If you feel that you do not have the time or resources to fix some of these problems, make sure that you highlight them to the prospective buyers and adjust your asking price.
Many investors are willing to buy a business that might have faced distress during the pandemic if they see the potential for a turnaround. Identifying and fixing the risk factors can help you highlight that potential, which will help with the sale of the business.
Hiring an experienced and reliable business broker can help you deal with these structural risks and make the deal happen. You can also take advantage of the Small Business Administration Debt Relief program to take care of some of these issues.
Test Out Your Operations
A potential buyer would want to ensure that they can run your business successfully in the current environment. Many companies had to halt or downsize their operations during the pandemic.
If your operations had to be stopped during the pandemic or you had to alter your business model, try to resume regular operations for some time before you put your business for sale. That way, you can fine-tune any aspects that might be out of order so that you can portray smooth operational capabilities to a potential buyer.
The COVID-19 pandemic might have disrupted many aspects of the business economy. However, that does not mean that you cannot sell your business in the present market. The pandemic’s effects will wear off in the new year, and the market will resume its former state.
Therefore, now is the perfect time to prepare if you want to spell out your business. A few simple steps can ensure that you get the maximum possible price for your company.