Do you know that 45% of small business owners in America are aged 65 and above? This was revealed by Barlow Research Associates recently. Another investigation by Emergent Research highlighted why business owners are considering selling out their business.
In this time of tough financial crises, business people do not want to take high-level risks. These risks are associated with new investments, efforts, and strategies. As per BizBuySell's Q1 Insight report, businesses related to e-commerce, online education, and delivery are in top demand these days.
If you are one of them and wondering how to sell your business during this pandemic, read below.
Recent Business Stats
Firstly, do not worry; investors are always looking for better opportunities. Though the current pandemic has transformed various factors, many stockholders are utilizing this time. However, the recent shift has brought a big boom in some industries while others are stagnant. Therefore, the probability of successfully selling your business merely depends on its nature.
It is because 11% of businesses related to essential goods, online selling, and deliveries are high in demand these days. However, 17% of businesses did not get any impact of the contagion. Others like the travel, hospitality, and luxury sector experienced a dropped down revenue graph.
As per the Market Pulse Report, 45% of selling transactions are delayed because of the current market trends. Since business valuations are made in light of historical data, selling a stagnant business will be challenging. However, when businesses get back to normal, small business owners can consider selling their business.
Let us now check out some recommendations for those looking to sell out the business in a year or two.
1. Determining the Right Time to Sell
Just like every other business, your small business has also faced a deep-down impact of the pandemic. Undoubtedly, the situation is uncertain, and we have no clue when the world shutters down again. The second wave of the virus has already started, and many countries are already experiencing a smart lockdown. In this situation, you need to determine your goals. If you are in the late 60s and do not want to put extra effort into running the business, it's better to sell it right now.
Waiting for the corporate arena to get back at a normal pace might turn expensive. It is because you need to put your retirement savings into running the business up to that time. Thus, moving on to the next phase of life will become difficult for you.
If rescuing the business looks tough and requires a long–term plan, it's better to sell it right now. However, if the business is giving an average revenue and new hurdles are not expected in the near future, waiting for the right time is a wise decision.
2. Recheck the Financial Practices
Many small business owners make a big mistake in financial calculations. They usually do not hire a separate financial professional. This results in appropriate entries in business expenses, some of which are personal. Thus, the net profit of the business gets miscalculated.
If this is the case with you, hire a CPA and let him clear the financial entries. In this way, potential buyers will see an original picture of your business. This step can turn in, either way, positive or negative. Some wrong entries in expenses may increase your overall revenue. However, some missing entries can also decrease your net profit.
In any case, a true picture of your business should be visible to the prospects. Apart from it, highlight the customers and their locations. Buyers will inquire about everything before making a final decision.
3. Fix the Red Flags
For selling a business smoothly, you need to clear all the risk factors. These include slow-moving goods, inefficient employee policies, low-margin buyers, etc. Potential buyers will run away if the business is revolving around multiple risks. Investors will only consider buying your business if they see good potential in it.
Therefore, take your time in evaluating the risks individually. Determine if the risks can be resolved easily or require a huge investment. If they are manageable, clear up the risks right away. However, if extra investment (more than your budget), time, and efforts are required, adjust the price accordingly.
You need to smooth up the selling process by clearing the risks as much as you can. Adjust the price in a way that works well for both parties.
4. Look For a Broker
Instead of wasting time and letting things become worse, contact a professional broker. You need a pay a percentage of the selling amount to the broker. However, it is way less than the risk associated with wasting time and investing in keeping up the business that you no longer want to run.
Related: Pitch-to-Brokers tool
5. Adjust Business Operations
No buyer will ever consider buying your stagnant business. To get some edge in selling, try to adjust your operations as per the current market trends. Though the buyer might change some operations as per new strategies, a smooth-running business is imperative to attract investors.
Related: How to Assess the Need for Short-term Internal Changes
It means making new strategies and adjusting your current operations. Do some work on it even if you are not willing to run the business anymore. You need to give it in better condition. For instance, make a plan related to digitization for running the business in the current scenario or create an e-commerce store.
I have recently adjusted the plan of my clock and home accessories business. I sold specialized clocks such as customized clocks, clocks with prayer times, clocks with songs, etc. However, since sales were low and in-store customers were near zero, I prepared a feasibility report of an e-commerce store to sell the goods, which worked. I reduced my overhead and made more sales too!
Wrapping It Up
In short, selling a business at this uncertain time might look difficult. However, prolonging it requires more capital, effort, and time. In this scenario, evaluate the nature and current positioning of your business. If you have enough investment (other than your retirement savings), waiting for some time is an ideal option.
However, if the business is facing a critical condition and investing more is not an option, it's better to sell it right away. Before you start looking for a buyer, fix your financial documents, mitigate the possible risks, and update your operational plans. In this way, getting a good price for your hard-worked venture is possible.
