How to Sell Your Business During COVID-19
Were you considering selling your business before COVID-19 disrupted the world? Maybe, it is this unprecedented global pandemic that has prompted you to sell your business. Either way, you’re probably wondering, “How do I sell my business during COVID-19, and should I?”
We’ve had many clients decide to sell during the pandemic. The isolation, social-distancing, and the continually changing environment have forced all of us to reevaluate our lives in one way or another.
For some, that reevaluation has led to the recognition that it’s time to exit their business and move on to something new. How do you do that, though? How can you sell your business in a time of economic and social flux?
It’s Still A Seller’s Market
We’re here to tell you that it’s still possible for you to sell, and you can sell for a high-ticket price, too.
In fact, many financial advisors are calling this a seller’s market for small businesses that generate between $2–5 million per year. Experts are further predicting that there will be two to three times more buyers right now than pre-pandemic.
Why? Because this is what happens during economic recessions and downturns. It happened in 2008 and 2009 with real estate and with businesses. Savvy investors jump in when they’re likely to scoop up a company for a better price than they could have gotten when the economy was healthy.
That doesn’t mean you're doomed to attract only lowball buyers, though. It merely means that the buyers are out there, but you need to be firm and fully aware of your business’s value before jumping in the water with the sharks.
The 7 Top Tips For Successfully Selling Your Business During COVID-19
A lot of conventional advice for business sales remains the same. However, these seven tips will help you capitalize on the times and exit your business with money in hand.
1. Identify Your Goals
What is your situation right now? Why are you selling? 40% of business owners in the U.S. are over sixty, and they’ve already bounced back from a recession once. If you’re tired and don’t have the capital and energy to reinvest and grow, then your best bet is to focus on finding a buyer quickly.
Alternatively, if your goal is to take the money from the sale for a new business, you might be better off waiting, reinvesting to boost your valuation and get the highest bid.
Ultimately, you need to know what your goals are and why you’re selling, which will make the entire process much more stress-free.
2. Organize Your Financials and Processes
Are your books a mess? Do you hold your breath at tax season? Are you unsure what your actual profit is because you run your business finances more like a personal bank account than a business account?
If so, it’s time to get all your financials in order. Organize your statements and work with a CPA to get things in shape.
You need to know your:
- Net Profit
Plus, you’ll need to have a streamlined view of exactly how money is coming in and how it’s leaving, down to each customer and purchase. In other words, it’s time to polish up those profit and loss documents.
3. Know Your Worth
It’s critically important to know how much your business is worth. Identifying your company’s value via a business valuation is the first step to any business sale. It’s the safest way to make sure you don’t get undercut by buyers. It also ensures that you don’t overprice yourself and scare off buyers.
You can get a quick valuation via a free online business calculator. However, you’ll want to work with your broker to get a certified business valuation to get an accurate business valuation and suggested listing price.
4. Zero In on Cash Flow
In chaotic times like these, buyers are going to pay a lot more attention to cash flow than they are to balance sheets. In COVID times, buyers want to know how much cash your business is generating and how quickly it works its way through the pipeline.
If you focus on how much cash flows through your business on a given day and how quickly that cash hits the bank account, you’ll be better poised to land an eager buyer.
5. Find Your Risk Factors and Fix Them
Is there any part of your business that would be risky for a buyer? Maybe you have an outstanding legal issue, stagnant inventory, low-profit-margin products, outdated policies, or other distressing factors for a buyer.
Find what makes your business risky and fix it. If there are unmitigable risks, like too many clients or a large debt load, you’ll want to be honest about those things with potential buyers. Sometimes, buyers will purchase businesses that have issues, but you need to be upfront about them from the beginning.
6. Know Your Intangible Value
Some things that aren’t related to the financials can increase your business’s value. These can be things like a proprietary manufacturing process, a highly skilled staff, extremely loyal customers, discounted rates on production, geographical location, and more.
Know what makes your business valuable and better than any other company in your niche. These values will come into play throughout the selling process.
Provide Peace of Mind to Potential Buyers
Will your business outlast the COVID pandemic? Buyers need to know your company has the power to outlast COVID and the looming recession.
Have a growth strategy and be ready to tell potential buyers why you believe your business is still valuable and worth the investment. If you had to shutter your doors because of the pandemic, this is even more important. Your cash flow and income will be hurting, and yet, you still have to let buyers know that your business can bounce back.
If you’ve adapted and responded to the unpredictability — that’s even better. Buyers will want to see that your business has the resilience and flexibility to move and adapt to whatever the current environment is.
Yes, You Can Sell Your Business During COVID-19
If you follow the above tips, your chances of landing the perfect buyer will be much higher. Remember, there are more buyers than usual right now.
If you really want to ensure success and avoid being taken advantage of by ruthless buyers — be sure to bring in a broker. Business brokers walk you through the whole process and make selling your business feasible and as pain-free as possible.
At Raincatcher, we have over thirty years of experience in selling and buying businesses. We’ve helped thousands of people sell their businesses, and we’ve done so in all kinds of economic climates.
If you’re ready to sell, contact us today.