COVID-19 has caused many business owners to start thinking about their exit strategies. If your business has been lucky enough to stay open until this point, you’re probably struggling with the following questions:
Does my exit strategy need a refresher?
How has my business valuation changed during the pandemic?
Should I hold off on selling until the economy bounces back, or should I sell it now before another tragedy occurs?
The answers to these questions will depend on how you respond to the following:
1. Will delaying the sale hurt or help your business?
The unfamiliarity and unpredictability of COVID resulted in a massive shift in human behavior, changing how business owners conduct their businesses. As we all retreated indoors and started wearing masks, lots of businesses pivoted their focus to selling pandemic essentials to stay above water.
If you’ve experienced a major shift in your revenue or business model, you might want to wait a little while before selling, because more adjustments may be in the near future. Interim revenue changes can alter your overall business valuation for better or worse. You’ll want your buyer to be doubt-free about buying your business. Otherwise, your exit potential will suffer greatly.
2. Are you really ready to sell?
There’s a major difference between being operationally and emotionally ready to sell. It doesn’t matter how excited you are about retirement, if you haven’t kept great financial records and are using outdated equipment, you’ll be taking a major cut to your overall value.
Make sure to review all your policies, processes, equipment, and practices prior to seeking out a business valuation. Keeping these up to date will be key to getting you the most out of your business and making it operationally ready for a smooth transition onto the next owner.
If you were able to maintain a steady stream of revenue or even suffered a slight dip last year, buyers might view 2020 as an “asterisk year,” and not hold it against you. If you were forced to shut your doors during lockdown last year, however, you may struggle to sell your business within the next six months. You’ll need to be 100% open for at least one year, ideally two, before you can sell your business for a decent price.
If you’re still unsure about whether now is the right time to put your business up for sale, try taking a week off. This will be the ultimate test to show you just how well your employees can operate without you, and what changes need to be made before you exit. If the thought of taking a week off is implausible, then that alone should tell you that you’re not ready to walk away just yet.
3. What’s the driving force behind your desire to sell?
If you were planning on selling your business last year before the world shut down, put yourself back in that mindset. What drove you to that point, and how has that driving factor changed due to the pandemic?
For many business owners looking to sell before the pandemic hit, this driving force was retirement. But once COVID came to town, millions of businesses worldwide saw their values plummet. If you’re one of these businesses, you may want to consider postponing retirement until its true value has replenished.
If you’ve been struggling since before the pandemic and are feeling burned out, your best bet may be to sell your business at its current value rather than continue to put more money into it. If you spend too much trying to resuscitate your business, it’ll only be harder for you to transition into retirement in the future.
4. Do you have the proper help?
You’ve spent your entire life building your business, and the last thing you want to do is sell it for less than it’s worth. This could be the biggest deal of your lifetime, and you need an expert with decades of experience in completing successful, complex deals to walk you through the process.
When you seek the help of a professional business intermediary like National Business Search, you can be confident that you’ll exit with top dollar.
The tiniest error can cost you millions on your valuation. Because we’ve been experts in the industry for over 40 years, we’re trained to look for these errors that you may overlook when preparing your business for sale.
Guest post courtesy of Faith Munsell. Let NBS help you get a good grasp on whether or not now is the right time to sell your business. Get started with a free business valuation by clicking here.