The COVID-19 pandemic is putting people out of work, slowing down lots of industries, and causing businesses to close. But at the same time, an uncertain chapter in America’s economic history may provide opportunities for individuals looking for a fresh start – or a soft landing.
Nearly half of small business owners in the U.S. are 65 and older, and a good number are considering selling their business rather than putting their resources and energy into bouncing back from the recession. But isn’t an economic downturn an inopportune time to sell a business?
Not necessarily, says Terry Monroe (www.terrymonroe.com), founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business.
“Some think due to the current difficult times many businesses are having that they wouldn’t be able to get a reasonable sale price,” Monroe says. “And they worry that they’ll have to delay retirement for several years because of COVID-19. But the reality is, there are lots of people, including the unemployed, looking to reinvent themselves and for a chance to run their own business. Investors with plenty of money are always around looking for good opportunities.
“The baby boomers who own many of these businesses are burned out and want to get out. But small business owners in general often don’t realize all that is required to achieve a successful sale. Done the right way, selling can result in owners walking away feeling they got good value for all they put into their business.”
Monroe says owners should think about the following factors when considering putting their business on the block:
- Ask yourself why. “Selling a business can initially be an emotional consideration, but one has to drill down to the reality of why they want to sell and why it would make sense,” Monroe says. “Burnout is a common reason. If it’s affecting health or company performance, it’s time to get out. Another common factor is the inability to expand when necessary – the owner doesn’t want to incur the added debt relative to their age.” Other reasons owners decide to get out, he says, include lack of a family succession plan, too much disruption in the particular industry, and hitting a wall in terms of profitability.
- Put together a professional team. “The selling process is very stressful,” Monroe says. “You can manage that by putting together a team of professionals who will guide you through it.” The team should include an accountant, a mergers and acquisitions specialist, and an attorney, in that order, he says. “You’ll hear business owners brag about the money they saved in fees because they did the negotiations themselves, when in reality they ended up leaving considerable amounts of money on the table,” Monroe says.
- Know if you’re selling too low. How do you know if you are selling too low? Do the research before you decide to sell your business. “Finding out what a business like yours is selling for in the marketplace is not going to be very difficult in the internet age,” Monroe says. “In the end, you should confer with a professional who understands your industry and can provide data to find your business’ worth in the current climate. Don’t over-focus on the price. What you should focus on is how much you would put in your pocket when the sale is complete.”
“Selling a business involves considerable thought and performing lots of work with an unknown timeline,” Monroe says. “But doing it right can lead to the reward one deserves.”
Terry Monroe (www.terrymonroe.com), is founder and president of American Business Brokers & Advisors (ABBA) and author of Hidden Wealth: The Secret to Getting Top Dollar for Your Business.