The rise of the COVID-19 pandemic and its eventual demise can offer challenges to your business, but it can also offer opportunities. If you were thinking of selling your business before the pandemic, you can still value and prepare your business for sale during this time.
The key is to understand a couple of things: first, you need to understand how your business is being affected and potentially will be in the future, and second you need to understand how, even if business is slow, the extra time you have can benefit you.
Abnormal Business vs. Business as Usual
Some businesses will slow and even come to a halt during a pandemic, and in California some businesses have had to question whether or not they are essential according to state guidelines. Other essential businesses may be very busy at the moment, but this unusual growth in revenue can come with challenges and may not be sustained once the pandemic has subsided.
This means that no matter what your current financial situation because of the pandemic, it is not normal, and therefore should not be used to value your business. Maybe your janitorial services company or other business services is considered essential, and your business is thriving, or the opposite may be true. Either way, your business should be evaluated on what is normal for you, and what you can realistically project for the future.
At the same time, you as a business owner might be busier than normal, and this may make it difficult for you to focus on the process of getting your business ready to sell. Your business broker can help you navigate the process, leaving you free to run your business and focus on your customers and clients.
However, if this is a slow time for you, you may be able to focus better on things like recasting your books, making sure your finances are in order, and working with a certified business broker to value your business.
Even when business is abnormal, you can still value your business and prepare it for sale.
What help is available to me as a California business owner?
If you have been watching or reading the news you will be aware of the Federal Government stimulus packages that have now been passed by Congress and signed by the President to now become law.
Help is also available from the State of California.
Understand what help is available from the both the US Federal government program and State of California Coronavirus business programs including a contact at the Small Business Development Center to help you with the necessary forms to complete and up to date information.
The Business Valuation Process
It is important to understand that selling a business takes time. No matter what is happening with your business now, the same thing may not be happening six months from now when a sale is complete. The other thing to understand is the business valuation process, which will be done based on your business history over the long term.
To complete this process, you will need a lot of documentation, including:
- Personal and company taxes from the last three years.
- Your latest profit and loss statements.
- Any contracts, pending legal actions, leases, and other items related to company income.
Depending on your business, you may need other financial documents as well, including bank statements and more. Your business broker can help you with a list. If your business is slow at the moment, you can start by using a free seven step business valuation tool.
This tool will not give you a certified business valuation, but it will give you a general idea what your business is worth and will prepare you for what documents you will need to have for your business broker to complete the valuation process.
Projecting the Future
While there are several other steps to successfully selling your business, there are some things that you will find it challenging to do during a pandemic. Investors are being very conservative, and financial moves are measured at the moment. It may take longer to sell your business than normal.
Another factor that is out of your control is what the recovery from the recession caused by the pandemic will look like. It may be a rapid, V-shaped recovery, or it may be a slower recovery. This depends on how quickly customer confidence and spending can be restored, and how various companies and investors react when the disaster has passed. We could follow China’s lead, or end up on a different path.
What is clear is that some industries will likely bounce back quickly, simply because of the law of supply and demand and the need for their goods and services that will grow rapidly in recovery. The only way to know if your company is one of these is to keep your eye on the pulse of your specific industry.
This may bring up a debate of when to actually sell your business. You can sell when the recovery begins, relying in the potential business gains to drive the value of your business, or you can wait, and sell your business once it is healthy again, and things are back to a new state of normal.
No matter which way you choose to go, you can still value your business so you know what it is worth, and you can prepare to sell your business whenever you are ready even during a pandemic. This time can be a great opportunity to reset, reevaluate, and prepare yourself and your company for whatever is next.