Every single business has been affected in some way by the pandemic. Many have suffered significantly reduced revenues; some are flat, and some are up 20% to 40%. As a business owner, you have a lot of tactical decisions and consequences to worry about every day. It would be best if you also carved out time to be strategic, so you don’t miss the fact that your ship might be heading for an iceberg. COVID 19 has reminded us all that one can never be too prepared for unexpected events and the importance of looking into the future.
Iceberg Dead Head
According to demographic experts, baby boomers formed businesses at a rate 240 percent higher than the norm from the years 1976 to 1985. This fact is based upon data from the Small Business Administration, the U.S. Census Bureau, and the Department of Labor. This wave was a business startup rate unprecedented in history.
So, why is this fact vital? Because baby boomers, who are now exiting their businesses in rapidly growing numbers, are headed toward a demographic “iceberg” that many of them may not fully realize yet. The supply of companies for sale may well exceed the market demand in the near future. You don’t want your net worth to be adversely impacted by an “inventory problem” or said another way an oversupply of businesses for sale. Compound demographics with the exploding national debt, potential shift towards socialism, and the business environment could become even more challenging.
Know What Your Business is Worth
Each year, you should know whether your business value has grown, shrunk, or remained stagnant. Knowing its worth helps you prepare for the day when you may have to sell it as planned or unexpectedly. You wouldn’t go three years without having your blood pressure, and blood chemistry checked. A business valuation is the same thing for the health of your business and allows you to reduce the unknowns and change things while you have time.
The drama, trauma, and fog that is the business world today require that you get as clear as possible about your situation, your options, and your strategy. Take a deep breath. We know it’s very, very hard, but you have to stop for a moment, access your unique situation with a professional M&A Advisor you trust, and then take action.
Start Planning for the Future
If COVID-19 has had such a negative impact on your business and it is no longer something that you are passionate about, then you may want to think about letting it go. It may be time to consider selling your business and starting a new one, or retiring and spending more time with your hobbies and loved ones. There is an accounting term called “sunk costs,” these are investments of time, money, and energy that are in the past. It is easy to throw good money after bad instead of facing the brutal reality whatever that may be. You should consult a trustworthy M&A Advisor to help you determine whether it is wise to continue the good fight or exit your business.
Prepare for a New Normal
The “new normal” for businesses today is about unpredictability, preparing for the unexpected, taking extra safety precautions, staying on top of cash flow, being very flexible with how you operate, and adapting to rapid change. There’s nothing impossible about any of these measures, but it will take strong leadership from you to go the distance. If you are not able or willing to continue these measures for an extended period of time, you should act sooner rather than later before the value of your business begins to decline.
In his book “Finish Big,” author Bo Burlingham researched business owners who were either about to go through the exit planning process, were going through it at the present time, or had just finished the process. He stated that only one business owner in the study identified the right successor the first time. The message: leave plenty of time for setbacks and surprises because they will undoubtedly occur.
The good news is you can sell your company before a COVID vaccine is developed and distributed. It will take more tenacity, proactive actions, and creative deal structures, but you can successfully exit if you act now ahead of the crowd that is sure to follow you to the exit door.
Edison Avenue specializes in selling businesses with revenues of $3 million to $25 million throughout the United States. “Our passion for winning is only exceeded by our passion for looking out for your best interests above all else.”
Edward Valaitis Managing Director of Edison Avenue has earned his Certified Business Intermediary (CBI), Certified Merger & Acquisition Professional (CMAP), Certified Value Builder (CVB). He has more than 25 years of experience building, managing, and selling companies with expertise in business transactions, business valuations and growing businesses. Business Broker serving the United States based in Tampa and Destin, Florida.