What Should You Pay Attention to When Selling Your Business During the COVID Pandemic?

Countless business owners are looking to sell their business. From February to April, the number of active entrepreneurs plummeted by 22% (3.3 million). In such a short period, the pandemic led to a 41% drop in business activity.

In May and June, the impact continued, dropping from 8% to 15%. Loses were substantial and felt in most industries around the globe. If you are looking to survive the massive shutdown, you need an effective selling strategy.

Here are a couple of factors you should pay attention to when you sell a big or a small business during COVID-19.

1. Know the Market

Don’t ask too little or too much for your business.

Certain transactions have been put on hold. Unfortunately, countless small businesses won’t be able to survive the pandemic. However, the current situation is estimated to turn the previously-run seller’s market into a buyer’s market.

Survey shows that 65% of responders claim the outbreak has hit their income. At the same time, 56% have availed moratorium. As a result, small business owners consider filing for bankruptcy. Many of which have already sold their companies.

This sudden shift from buyers to the seller’s market has forced some valuations down. Now there are 2 to 3 times more potential buyers for your business. This will create a valuable opportunity to gain revenue.

To get the best offer, you need to know your value and your market. Decide the ideal selling approach. Focus on negotiations and valuation before drafting up the final agreement.

Tip: Private equity buyers are taking extra precautions than they did before the pandemic. They will evaluate all the risks, take a closer look at the projections, cash flow, and prospects of your business with additional scrutiny. So, make sure you have everything it takes to get the attention you need.

2. Consider the Timing

Will selling now hurt or boost the value of your company?

With the onset of the pandemic, countless industries are becoming obsolete. The social impact is too great, which is why the epidemic is taking a heavy toll on multiple business sectors.

The market is suffering heavy disruptions. Those most well-known changes are remote-working developments. A huge chunk of the population is now working from home. This has left companies with unleasable office space.

Thus, if you are looking to sell an office, the value may not be as high as you expect it to be. So, before the future transaction, do a complete financial analysis. Update the financial forecast and analyze the impact of the epidemic.

Think about the:

  • Condition of the market
  • Sale costs (accountants, consultants, lawyers, taxes, platform pricing, etc.)
  • Future financial needs

If the company can achieve excellent market value and sell at a high cost, the timing is perfect. Otherwise, it will leave a predominantly negative impact for both parties involved.

Want to know more about picking out the right time to sell a firm? Check out the video below. Here, you will learn about the ideal parameters for selling.

Video: When is the Right Time to Sell My Business? | Freedom Factory

3. Remain Proactive

Your business should remain operational even when you are trying to sell it.

One of the most typical mistakes small business owners make is giving up too soon. Although they will be selling the business, it’s critical to stay in close contact with all the suppliers. Of course, the crisis has left a huge impact on the supply chain.

However, without any functional operations, the business loses value. So, try to keep up with demand and locate alternative sources for materials, at least until you find a good buyer. This will help you stand out in the buyer’s market and aid you in getting better deals.

4. Hire a Strong Representative

Doing business with a brokerage firm will provide you with valuable insight when looking for a buyer.

Related: Find representatives with the Pitch-to-Brokers tool

Entering the buyer’s market takes plenty of research. It’s is a time-draining process, which for near-senior people will prove difficult. Particularly with the constant fluctuations caused by COVID-19.

Working with an expert can help. Consultants or brokers will set you on the right path. There are over 600,000 registered broker representatives in the U.S. They are skilled in selling a company on a local or global market.

They can help with sale offerings, advertising, financial documents, legal papers, etc. But most importantly, they will put the proper tag on your company. They will prevent you from taking any questionable offers. With an approach such as this, you will be able to sell the business faster.

5. Take Care of the Financial Practices

Countless business owners think of their company as a piggy bank. They run as many expenses as they possibly can with the IRS. They use it to fund their personal expenses and live a lavish life.

But, for the company to sell, these unreasonable expenses have to end. Otherwise, you won’t gain any profit from selling the business. To do it the right way, start with cleaning up the books. This will help you gain a complete picture of the probable buyers you can offer the company to.

Related: About Seller's Discretionary Earnings

You will know exactly how much you can gain from each location and your customer base. It will help you move forward.

6. Keep Promoting

Don’t think a broker will do all the work for you. Instead, put a lot of attention to your marketing strategies. Promoting your sale is the key to finding the right buyers. But, many business owners think that leaving the promotion in the broker’s hands is enough to get noticed.

Absolutely not!

Who knows the company better than you do? Is there anyone more eager and motivated? A broker will get some of the work done. But, the majority of the advertising will be in your hands. Have in mind; the prospective buyer will need a solid plan as to why they need to buy your business.

Related: How to Sell Your Business Without Hiring a Broker

With an adequate strategy, you can get rid of all the doubts and fears.

7. Know the Risks

Do you want to scare a buyer away? Then you need to know all the risks that come with selling a business. That includes:

  • Outdated worker policies
  • Low-margin products or clients
  • Slow inventory

These are basically the "red flags" in the industry. If you work on finding them early on, you will increase the odds of locating a suitable buyer. You will get much better deals with each offer you present.

It’s a fact that businesses struggling with slow inventory will find it difficult to work with a bigger client. They won’t be able to make the most of their sale and miss out on a valuable opportunity.

For example, let’s say you are interested in buying a firm. That firm has trouble taking care of a huge client list and can’t pay out the bank loan. You want to purchase that company since it is a valuable commodity in acquiring a steady client base.

However, there is a huge issue. The company is not working as it’s supposed to. The inventory is moving too slow, and they present you with outdated employer policies. Would you be willing to buy it and spend even more money on fixing it? Many won’t.

Remember, there is a lot at stake here. Unless you take good care of the business you own, it will be hard to sell it later on.

8. How Ready Are You to Sell the Business?

Selling a company may sound like the most practical option for getting out of a crisis. But, the question is, are you emotionally ready to take that step?

For most owners, it is much easier to sell a company when it’s not fully operational. However, for those who’ve worked in that business for years, it becomes difficult to sell it just yet.

When you are not emotionally ready, you tend to make more mistakes. You think your business is worth more than it actually is, or you are not ready to accept any deal – no matter how good it might be.

This is a typical mistake. Garnering the ideal price is done with a clear mind. Properly managed financial records and well-kept equipment will only make the process go a lot smoother. That’s why you need to acknowledge the real worth of your business and make reasonable decisions. It’s the only way to get the job done.

Final Thoughts

Facing plenty of bumps on the road when selling is normal for any entrepreneur. That’s why you need to know all the tips for getting it done the right way. The information listed here can help you stay on the right track.

David Kidwell is an experienced content creator with a high interest in entrepreneurship. He sometimes blogs for writix.co.uk , reads books and plays video games, when not trying to learn something about everything.





Published by ExitAdviser


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