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Selling an Essential Business During the Covid-19 Pandemic

By February 21, 2021 No Comments
Selling an Essential Business During the Covid-19 Pandemic

With the pandemic, many business owners are wondering if it might be time to sell. For many, however, selling their business right now might not be a good idea since revenue is down significantly. Owners of an essential business, however, are more in luck. Now might be the perfect time to sell your business, provided, you, the owner, are careful about how you handle the sale. The best way to do this is to work with a good business broker who can help the owner prep for the sale, help find the right buyer, and help facilitate the sale.

When Business is Good, It’s a Good Time to Sell

The timing of any business sale is vital. When it’s not timed properly, the seller will not receive as much in proceeds for their business. This is obvious.  However, what might not be obvious is how buyers perceive buying a business.  When a business is growing 20%+ per year, this is a good time to sell.  What many sellers don’t realize, is that if that growth rate even slows down, buyers may believe the business has “topped out” and may not want to pay a top multiple for that business.  Many sellers believe this just shows that the business is “steady”.  They fail to put themselves in the shoes of a buyer.  Buyers almost always use debt to buy a business and want growth to pay off that debt.  If revenue growth slows, they perceive that the business’s growth might be in the rearview mirror.

This brings us to essential businesses or those that did well during the pandemic.  If the business had to shut down during the pandemic, it might not be a good idea to try to sell the business. Chances are, it’s going to be difficult to impossible to find a buyer who wants to purchase a business that won’t be profitable until the pandemic has ended. For these business owners, waiting until they have been opened again for at least a year or two could be a good idea.

For those who own an essential business, however, it’s going to be far easier to sell the business and walk away with a profit. If the business profited during the pandemic because it was an essential business and remained open, it shows buyers that the business will thrive even if there’s a downturn. To buyers, if the business was able to thrive during the pandemic, it shows that the business can survive a recession or pandemic, so they’re going to be more interested in purchasing it.

Check to Make Sure the Business is in Shape to Sell

Before jumping in and starting the sales process, it’s imperative business owners make sure the business is in good shape to sell. They’ll want to check to make sure their financial records are up to date. They should also focus on the staff and supply chain, as well as any other risk factors that can make it more difficult to sell the business.

  • Stable Financial Practices – Just because the business has made a profit during the pandemic doesn’t mean the financials are in order. Have a CPA go through the finances for the business to make sure everything is current, explainable, and think about potential questions that a potential buyer may have, regarding the business’s finances.
  • Staff and Supply Chain – If the turnover rate for staff is high or there is any issue with the supply chain due to the pandemic, it’s a good idea to look into these issues right away. Fixing them before the sale is important, as this can give the business a better chance of selling. Think about why the staff had a higher turnover rate during the pandemic and contemplate ways to keep the current staff stable, now that the vaccine is being distributed and life might look at bit more normal over the next year. Buyers want a stable staff.  Plus, are there issues with the supply chain that need be fixed?  Buyers will want some assurance that supply chain problems have ended or will end, sometime soon, or they may be hesitate to buy or pay you top dollar.
  • Other Risk Factors – Before going to market and before the business is officially for sale, think about any risk factors that could reduce the price for the business or make it more difficult to sell. Before officially marketing the business, this is usually a perfect time to fix anything that can be fixed, as this could help bring in a higher price or enable the business to sell faster.

Remove the Emotion

Selling a business is an emotional event, but the pandemic may worsen this. It’s easy for business owners to end up feeling stressed or overwhelmed because of the pandemic, plus the added pressure of running their business. If it’s time to sell, make sure the emotion is removed from the equation before the sale proceeds. When sellers are too emotional, it can make it more difficult to see if a buyer is the right buyer or if the amount and terms offered are truly fair.  It may be a good idea to wait a little while to sell the business if the emotion is too much right now.  If it’s possible to avoid getting emotional about the sale, now could be a great time to put your business up for sale. If a business owner wants to sell now, it may be a good idea to work with a business broker.  Owners can get advice from someone who isn’t emotionally connected to the business, yet who will want them to get a good deal.  Business brokers are financially incentivized to maximize proceeds for their clients through their commission structure.

Create Clear Goals for the Sale

Any essential business owner who decides to sell right now should make sure they have clear goals for the sale. They need to think about what they want from the sale, what their plans are after the sale, and anything else that might impact the sale. If they’re in a rush to sell, they may not get as much money because they won’t find the right buyer. If they are preparing to retire or invest in a new business, they may have a little more time to look around for the perfect buyer, which could help them reach the financial goals they have for the sale of the business.

Hiring a Business Broker for the Marketing and Sale

One of the best things a business owner can do when they’re ready to sell is hire a business broker. A broker will handle the marketing and sale of the business, so the business owner can focus on running the business while the business broker runs the deal. A business broker has the experience and training to help the owner get the best deal possible.  This can also mean that they sell the business faster than the owner could. They aren’t emotionally connected to the business, so they can provide unbiased recommendations to help the business sell. They’ll be an invaluable asset throughout the sales process.

If you own an essential business and you’re thinking about selling, now may be the perfect time. You’ll want to make sure you have a business broker to help you through the sale, so you can sell the business and reach your goals. Check out the website for CGK Business Sales now to learn more about how they can help with the sale of your essential business, or an business that has done well during the pandemic.