Succession Planning During the Pandemic: Is This the Best Time to Sell Your Business
Have you been on the lookout for an exit strategy from your business? Perhaps you’re feeling burnt out, and want to spend more time with your family. Or you might be out on a pursuit to explore other professional avenues and creative channels. Or maybe you just want to retire to focus on your health.
Irrespective of your reasons for selling a business, you’ll be faced with a crucial dilemma. Should you sell your business in the middle of the pandemic?
If the COVID-19 pandemic has taken a toll on your revenue streams, your natural instinct would be to wait until your business is profitable again. Or you might be skeptical about whether buyers would be willing to shell out large sums of money during an economic downturn.
In this blog, we’ll delve deeper and explore whether selling your business during the pandemic is a clever move. Let’s get started.
Sales Have Declined, But Not for All Businesses
The general perception is that all businesses have seen their sales plummet during the pandemic. While the pandemic has dealt a huge blow to businesses in specific industries, such as hospitality and tourism, other sectors have seen an uptick in sales.
According to a 2020 study, 11% of businesses saw their sales rise despite the pandemic. The companies belonged to various essential services sectors, such as e-commerce, online education, delivery, etc. Also, another 11% of businesses reported no impact on sales due to the pandemic.
If your business belongs to these sectors, this is the time when your company’s valuation is going to peak. In other words, you have the perfect opportunity to sell your business to interested buyers, and enjoy a plush and peaceful retired life.
Even if your sales have plummeted during the pandemic, it could still be wiser to sell it right now at a lower asking price. Waiting for your company’s valuation to go up will require you to sustain your business using your hard-earned savings.
But by the time the pandemic is over and your revenue picks up, you’d have burnt through your retirement savings. That means you’d have to work for more years to rebuild your bank balance. It’s one of the most common mistakes that business owners make during an economic crisis.
If you’re unsure about selling your business right now, it’s a good idea to get your business evaluated by an online valuation expert, such as Website Closers. They’ll analyze your revenue, sales, profits, and other parameters to determine how much your business is worth right now.
That, in turn, will help you make an informed decision while planning your exit strategy.
Increased Demand with Low Supply
Contrary to what you might believe, buyers are always on the lookout for profitable acquisitions. While cash flow might be an issue during the pandemic, lower interest rates still make it possible for buyers to accumulate funds.
Apart from serial acquirers, many individual entrepreneurs are looking to buy businesses during the pandemic. That’s because they want to diversify their revenue streams. Similarly, salaried employees who have enough savings might be looking for ways to achieve financial freedom amidst the uncertainty of their jobs.
It’s interesting to note that while the demand for buying a business has escalated, it hasn’t been met with adequate supply. That’s because business owners are refraining from putting their companies on the market due to the precise reasons we’ve discussed earlier.
That means, if you decide to sell your business right now, you’ll have to face fewer competitors. In a seller-driven market, you’ll have greater authority to negotiate a deal on your terms, and even escalate the asking price.
According to the NFIB Small Business Optimism Index, nearly 36% of business owners have hiked their average selling prices. The only instance when the reading was higher than that was way back in 1981.
Irrespective of whether your business belongs to an essential or non-essential sector, negotiating a deal in a sellers’ market will fetch you a higher price.
Know When to Strike the Hot Iron
Smart business owners have a fair idea of different exit strategies even before they launch a business. Selling your business during a pandemic might seem like a hasty and uncalculated move. But considering the high demand from buyers, it’s as good a time to sell your business as any.
If your business has been struggling due to the pandemic, selling it to a new owner will free you from the challenges of rebuilding it from scratch. Make sure you get your business evaluated by an expert to get a clear idea of the optimal asking price.