The global pandemic forced many people to reevaluate their lives. As a result, some business owners now wish to sell and do what they always dreamed of or they may simply want to retire. Doing so terrifies them, however, because they worry the business won’t sell until the pandemic is over. Lay this concern to rest.
Investors continue looking for opportunities regardless of what is happening in the world. Although advisors do expect valuations to drop as a result of COVID, each business is different. If you want to sell your business, now might serve as the perfect time to talk with a business broker.
The International Business Brokers Association believes business valuations will decline. However, Main Street points out that valuations typically trade within 10 percent of the asking price. Furthermore, most advisors believe it is a seller’s market right now for those businesses with a value of between $2 million and $5 million.
Essential businesses may actually see an increase in value, while some businesses find the pandemic has no impact on their value. Although business owners will find it more challenging to sell an organization that went into lockdown because of the virus, they should recover once normal operations resume. What should a business owner do if they want to sell in the coming years?
People sell a business for a variety of reasons. If a business continues to struggle, the owner may wish to sell at the current value rather than continuing and trying to bring the value up. This ensures they don’t use valuable funds that will benefit them as they move forward with life.
Never use business funds to pay for personal expenses. Many owners currently do this and get away with it. However, this distorts the true profit of the organization and can hurt the owner when it is time to sell. Clean the books to provide a clear picture of the financial status. This also helps the seller secure financing if they need it.
Certain risk factors could lead to a sale falling through. This includes any litigation that is ongoing, inventory that doesn’t move, and outdated policies regarding employees. Identify any risk factors and correct them or adjust the asking price to account for them. Investors often look for distressed businesses with potential, but the seller must be forthcoming about any issues. Some buyers in this situation will offer a flexible deal structure and may use an SBA loan or Debt Relief Program to help finance the purchase.
Take a Vacation
Owners need to step away from the business and take a vacation. This ensures everything runs smoothly even when they aren’t present, which is something potential buyers want to know. Furthermore, it allows the current owner to see where changes need to be made before putting the business up for sale. If this isn’t possible because other people can’t manage the company, make changes so they can.
Begin taking these steps today. The sooner you do so, the sooner you can put the business on the market. In addition to helping you increase the value of the business to sell it, you’ll also generate more profit with each positive change you make. For example, resolving or eliminating risk factors can help to boost profits, so the owner benefits while they own the business and again when they sell. This alone should make every person who owns a business want to take these steps, even if they aren’t planning to sell in the near future.
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