You planned to sell your business and retire, but then the COVID-19 pandemic changed everything? Maybe you were doing well with your brand and you didn’t have any sales plans. But the critical situation made you wonder: are you able to maintain the business at this time? You started considering selling it to someone who can persist during the times of crises.
Two types of businesses suffered grave consequences during the pandemic:
- Heavy industrials, which face seriously falling demand
- Businesses that cannot function normally with social distancing
If your brand belongs to one of those categories, it will be more difficult to close the sale.
But when you’re ready to sell, you should NOT do it with loss. Many business people will be interested to buy at a minimum price, trying to convince you that you can’t get a better offer at this time. Don’t fall for that trick. Every deal should come with benefits on both parts. The new owner will get a viable brand wired for growth, and you’ll get enough money to justify selling the business you’ve invested in.
The process may be longer than expected. It will take a lot of patience on your side, since the buyer will have to evaluate all risks of buying at this time and see an obvious advantage.
Tips: How to Sell a Business with Profit in Times of COVID-19
1. Identify and Emphasize Your Competitive Advantage
When someone is interested in buying a business, this is the first question they will ask: "What’s its competitive advantage?"
They don’t want to build a brand from scratch. Sure; they will make a few changes to make it more successful and more suitable to their style of management. But they need an already established brand that will start bringing them profit right away.
You already have your competitive advantage. You spend a lot of time reasoning around that issue when you were building your brand. You focused on a single attribute that would allow you to outperform your competitors.
At this point, you need to conduct yet another market research. Has a competitor managed to outperform you on the same competitive advantage? Maybe your shop was known for offering low prices for high-quality products to the local teenage audience, but a chain of shops caused a drop in sales recently?
You need to make sure that your brand still has what it takes to boost the value of the investor’s money. Identify the clear advantage of your business, and emphasize it during the sales process.
If you lost it recently, try to revive it. This will be the main motivating factor of the purchasing decision. Explain how your buyer can make this brand noticeable among the entire competition.
2. Prioritize the Cash Flow
During times of crisis, business buyers will mostly be concerned about the profitability of your business. They will want to return their investment in a short period of time, and start profiting from there on. Can your brand help them achieve that goal?
Before you start the sales process, you need to boost the brand’s profitability as much as possible. Start by reviewing your working capital in detail. You must be very diligent in the accounting process, predicting that the receivables will take longer to collect at this time. Try to boost the sales by offering promo deals, so you’ll improve the way your brand looks in the accounting books.
Can you apply for any of the government’s programs for saving and supporting small businesses? Since these programs come with specific obligations, you should talk to a financial advisor to see if you can get into them before selling.
It’s also important to work on your relationships with key suppliers; the buyer will need them, too. Don’t allow for any shortages to happen, so you can keep the business running regularly.
If your business is not profitable, you’ll have a hard time selling it. This may be the time for some hard decisions. If letting staff go is the only way to ensure long-term profitability for the brand, you’ll have to do it as soon as possible. Nobody said this was easy.
3. Be Aware of the Factors that Could Drop Your Price
When an investor is interested in your business, they will search for flaws that let them drop the price. It’s just like buying an old car and nitpicking over tiny details, so you could drop a few hundreds. In this case, we’re talking about way more than a few hundreds.
These are some of the factors that may enable the buyer to negotiate on a lower price:
- Low-margin products
- Lack of competitive advantage
- Outdated inventory
- Offices that need thorough renovation
- Inefficient employee policies
All these flaws would endanger the smooth transition to a new business owner. So what can you do to minimize these drawbacks when a potential buyer evaluates your brand? Fix as many of them as possible! If the offices need to be updated, paint the walls and clean them up as much as possible. Fix the plumbing issues, and cover any other repairs that don’t require a large investment. Keep in mind that the new owner might want to renovate the place anyway.
You must improve the "vibe" in the workspace as well. This is the time when you have to motivate your employees more than ever. They are scared of this transition. According to the latest reports, U.S. employers removed almost 30 million positions from payrolls over the Spring 2020. Your workers are worried that they would lose their job, too. That will affect the workspace environment in a negative way. You should support them during these difficult times. When the potential buyer checks out your business, they should notice a positive, motivated environment. Make sure to achieve that!
4. Find Potential Buyers and Get Several Offers
The average time to sell a business takes from six to nine months. This means that you’ll have to be patient. It also means that you shouldn’t rush to sell your brand, no matter how much you want to retire NOW. You will need at least two comparative offers, so you can choose the best one.
Use your existing contacts. Do you know people who are interested in starting their own business? Spread the word around. You can talk to local influencers, who can inform more people about your intention to sell.
Use LinkedIn, too! It’s a powerful platform for making connections within your industry. You can contact potential buyers directly through the platform. Share a link to your website, explain what your business is all about, and tell them that you’re interested in selling. Explain how they could benefit from expanding their investments to your brand.
Make sure to contact only serious people, who have enough money to finance the purchase without delays.
Of course you’ll leave some space for negotiations. It’s how all sales work. However, you should stay firm to a reasonable minimum and never go below. If it takes a bit more time to reach a price that works for you, it’s okay. Just keep expanding your contacts and looking for new potential buyers.
5. Help the Buyer Visualize the Future
For this, they will need to look into your past, too. Prepare all tax returns and financial statements for at least two years. Rely on your accountant to help you review them, so you can show clean records to the potential buyer. This shows that your business is viable for growth.
But don’t leave it there.
Create a realistic plan that proves your business can function successfully, even in today’s challenging circumstances. Does your business plan still make sense? If not, you might want to improve it, so it will be attractive to the buyer.
Make suggestions for small changes that would improve the business operations in the future. This will inspire the investor to see potential for growth in this deal. They don’t just want to return their investment. They want more profit from a growing business.
It Takes a Lot of Work
The most important thing is to support your employees during this transition. You may have to let some of them go if your business isn’t financially stable before you sell it. That’s a heart-breaking decision, so do your best to help them get another job. Use your business contacts!
Talk to the potential buyers and set a condition: if they get the business, they mustn’t replace the employees for a given period of time.
You’re doing all this work to make your business more profitable during a critical situation. When you do everything, you’ll start thinking: is it worth selling right now?
That’s your own decision to make.
What we do know is that you have to make your brand attractive for someone to buy. No one will be interested in paying a decent sum for a business that’s failing because of COVID-19. You’ll have to do the hard work, so you’ll get your reward. Once you sell your business for a decent price, you’ll be able to retire and enjoy the comfort of security when you most need it.
About the Author
Vendy Adams is a writer, researcher, and editor for a service that writes speeches. She focuses on motivational and business topics most of the time. Her idea of a fulfilled life is helping others to achieve their goals.
More on the topic: 7 Tips for Small Business Owners to Survive the Coronavirus Crisis