Since the outbreak of Covid-19, the business brokerage / investment banking world seems to change dramatically every 30 days.
As we enter the middle of summer, here are three tips we are giving business owners and business sellers:
1. After the 30 to 45 Day Shut-Down Starting in Mid-March, There is a Market Again
But, banks and institutional lenders have gotten much more cautious, taking marginal buyers out of the market.
We are qualifying prospects more carefully so we do not risk wasting a lot of time on transactions that cannot be financed.
We do recommend that if you receive a good offer, take it seriously as it will be harder to obtain as many offers as before this started.
2. Run Your Business Like You are Going to Own It Forever Particularly During a Sale Process
Your best negotiation strategy is that you are making money and will keep running it if you must. Be profitable every day.
Clearly, due to current circumstances, some businesses cannot do that. They should not sell at this time unless they do not have a choice. Unfortunately, there are going to be a lot of unavoidable bad outcomes due to Covid.
If your business is in the middle ground, make the tough choices and get pricing up if necessary. Always work toward having your costs in line with your likely revenues.
3. Good Companies will Attract Buyers
The discount you will need to give from your February 2020 price is going to depend on the uncertainty in your industry, your supply chain, your customer concentrations etc.
The sense of risk has been elevated. How high that perceived risk is will vary from no perceived increase in risk with liquor stores to incredible going concern risk with high end sit down restaurants.
Most businesses are somewhere in the middle and it appears they can sell with price reductions that make sense compared to the increase in risk. Buyers and sellers may consider forms of risk sharing through earn outs and the like.
If you would like to learn the value of your business as you make important decisions, please connect with us. We would be happy to discuss your business’ market appeal.
Clients choose Harvest Business Advisors for our accurate business valuations and our proven ability to deliver the highest price in the smoothest sale transaction possible. Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland and Virginia. Connect with us at info@harvestbusiness.com or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.
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