Preparing for a Sale as we Move Through and Past COVID-19
Eventually, every business owner begins to consider exiting their business. A successful exit strategy has many parts, each crucial to ensuring you and the business leave the process with your desired outcome. Like many, you are probably wondering how COVID-19 affects your exit strategy. But, there are many questions: Is this the right time to sell? What do I do about Q1 and Q2 financials? How will a sale during this time affect my employees?
You are not alone. We at Piedmont M&A Advisors are working with numerous companies, just like yours, who are currently in the middle of the selling process. We know that fundamentally sound businesses always attract attention from potential buyers – even now in the middle of the current scenario.
The fact is, nothing has really changed in what a purchaser wants to see in your business. However, some advanced measures will go a long way to demonstrate your business’s worth. Here, we share some early steps in the selling process that will prepare you for a sale in spite of the effects of COVID-19.
The “COVID-19 Effect”
When selling a business in these uncertain times, there are some informational items that a seller should expect to provide and be able to discuss in detail. Proper preparation on the selling side will provide clarity about your business and counteract the ambiguity of our current COVID-19 situation.
One of the first steps you need to take prior to marketing your business is to determine its range of values. Many variables enter this equation, and a professional and independent third-party valuation expert should be consulted. This valuation expert will provide adept guidance in showing the most accurate long-term valuation for your business while addressing any effects of COVID-19.
A prudent purchaser will want to know how well the business performed during Quarter 1 (January, February, and March) of the previous 2-3 fiscal years compared with the same time period in 2020. Expect also to provide similar information for Quarter 2 (April, May, and June) of the previous 2-3 fiscal years as well as 2020. Additionally, sellers should be prepared to answer questions such as:
- What is the mix of business by customer for the past three years in Q1 and Q2?
- Have clients paid on a timely basis, or are they exceeding your normal payment terms and historical results?
- How have your inventory levels changed in these time periods?
- How has COVID-19 affected your business’s vendors and competitors?
Along those lines, this is a critical time to be industry-aware. An analysis of the following questions will build crucial knowledge when selling your business:
- Who in the industry has fared the best through the COVID-19 period (and how; and why)?
- Who has fared the worst (and how; and why)?
- What will the selling company have to do better, more, and less to move forward?
- What will need to change as a result of COVID-19?
- As a business seller, what time frame will be required to resume some aspect of “normality” in your operations?
Sales and cash forecasting are critical during the coming months as businesses get back to as close to “normal” levels as possible.
Choose the Right Partners
When selling your business, in COVID-19 or not, be sure to surround yourself with a team of experts you trust. You’ve invested years of your life into your business, and you want to ensure your vision continues after you have left.
Your chosen and qualified investment banker will work with you through questions like we’ve covered here to establish a proper valuation and move forward with other steps in the selling process. In future months, we will cover more of these action steps in detail.
Piedmont M&A Advisors is here to help you navigate the process of exiting your business in a way that satisfies your financial goals as well as the long-term interests of your business and your employees. Our strategic process puts you in control and provides the insight you need to initiate a strong blueprint for success.