Many business owners are asking us if they should defer the decision to sell their business because of COVID-19. It is a fair question. After all, the impacts that the coronavirus may have on some small businesses are significant.
Our experience and current observations are:
It is safe to sell your business. You don’t have to meet with buyers; we use a video conferencing application. If necessary, we can show your business via a virtual tour rather than have buyers visit it.
Financing is not disappearing. The mission of the Small Business Administration (SBA) includes the hefty responsibility to “maintain and strengthen the economy”. In addition to lowered interest rates, there are proposals being considered which should encourage buyers to get a loan now.
It remains a good time to sell if your business is not impacted significantly.
· Not all businesses are impacted equally. Some businesses – such as cleaning businesses – are doing well. If your business is not hurt much by the coronavirus concern, it may be a good time to sell.
· During the 2008 financial crisis, we were still very busy selling businesses. Banks started providing lower interest rates on SBA backed loans to stimulate the economy and are still doing so.
· Buyers are not disappearing. On the contrary! Many potential business owners and strategic acquirers seek the opportunity that a slowdown presents. They want to be better positioned ahead of an eventual economic recovery.
Deferring your sale does not guarantee a better sale price. The value of your business is usually based on the prior 3 years financials; in the face of uncertainty, a small discount may be applied. But 12 months from now, the 3-year look back period will include how your business performed during that volatile time. So, depending on your business/industry, the sale price may not be very different now or 12 months from now. The question becomes – how long and through what degrees of uncertainty do you want to stick it out?
If you think you will want to sell your business in a few months, now is a good time to prepare. We can have meaningful conversations and conduct a business valuation now when you have the time, if your business is a bit slower. We can also prepare our business reports so that you are ready to launch the listing at the right time.
Our business is selling businesses, not listing businesses, and we are compensated by a commission only when it sells. We provide owners with informed market valuations and valuable information on industry transaction trends. We also manage expectations and will only list a business if we believe it is the right business and now is the right time. It is part of our core belief system. Please contact us for a complimentary discussion about selling your business or buying a business now or in the future.