The Changing Landscape to Selling Your Business in a COVID-19 Climate by Charles Morningstar, Sound Business Brokers Wes Martin, Sound Business Brokers SPECIAL GUEST COLUMNISTS
S
mall businesses across all business verticals, have gone from enjoying tremendous success, to being shuttered literally overnight. Perhaps prior to the COVID-19 crisis you had thought about selling your business and now are asking if that is still viable. The answer is yes, but there are more factors to consider before you move ahead. Bottom line, the process is the same, but the parameters have been modified. Here I have addressed six higher profile parameters to a transaction process which have changed since the onset of the COVID-19 crisis. Be aware, these are not the only parameters which have changed, but taking these into consideration should help a business owner considering selling to better understand how the topography of a business transaction has mutated.
Buyer’s Market
There can be little doubt that in the coming months following the ‘re-opening’ of our economy that we will be in a period of a perceived buyers-market. It will be important to invest in whatever marketing apparatuses in order to return the financial health of the business back to ‘normal’ or at least upward trending as much as possible. If this happens, it will be easier to put less weight onto the COVID-19 era financials. On the other hand, some businesses may be excelling during this time and when the crisis subsides, their financials may decline to pre-COVID-19 levels. Good news can be found in the fact that there are buyers still interested in acquiring business opportunities. Yes, some might be looking for distressed enterprises that they can 14
I
May 2020
I
Thurston County Chamber VOICE
Wes Martin. Photo courtesy of Sound Business Brokers.
pick up at rock bottom multiples, but we have the belief that many will be similar to the same sort of buyers that we’ve always dealt with.
Post-COVID-19 Valuations
While we might be taking a break from the pre-COVID-19 sky rocketing multipliers of the booming economy and scarce inventory conditions leading up to the crisis, there is no reason to think that companies that weather this downturn will experience bottomed out valuations. Multipliers will be more dynamic and intelligent. If your business thrived and continues to do well in the months after normalcy is established, you might see an increase in multiples, while if your business hit a brick wall financially during the crisis but jump started afterwards and is cruising back to profitability-then your multiples should sustain a reasonable value for your efforts. Will valuations most likely be lower than in the beginning of 2020? The answer is yes but with intelligent presentation and narrative, you should be able to present the best scenario for value in the market.
Reliance on SBA Lending
It’s still too early to predict but if the last recession was any indication, access to SBA lending will tighten and most likely thurstonchamber.com
