Prepare for the Market Rebound
By Jane Johnson
For many business owners, the economic effects of the COVID-19 pandemic have been devastating – especially for those who were planning to sell their businesses. And many of us are still in survival mode. But once things settle down, we encourage you to view this slowdown as an opportunity to renew your efforts and focus on rebuilding the value of your business with your exit in mind. Here are a few suggestions for where to start.
Look for ways to grow, maximize profit, and innovate.
Drop products and services that are no longer profitable or relevant. Focus on what makes money. Mining customer reviews and communications are a great way to figure out if there are areas where you can adapt or update current products or services to better align with your customers’ needs or wants.
Think creatively to take advantage of new opportunities. Are you able to deliver your current products or services in different ways than you have previously? Can you leverage technology in new ways to more cost effectively reach prospective customers? And remember that building recurring revenue into your business is an excellent way to increase value.
Conduct a comprehensive review of your fundamental business processes and operations.
This will give you a chance to uncover areas that need to be improved long before a potential buyer’s scrutiny or due diligence. Consider having your financial statements reviewed by a CPA and evaluate your cash flow management. Take a hard look at your sales and marketing processes.
Look for and shore up weaknesses such as bad debts, undocumented policies and procedures, the lack of written job descriptions, insufficient employee non-compete agreements, environmental issues, and so on. Carefully track what is impacting your business now, so you can see where adjustments need to be made.
Start your exit planning.
Exit planning is an essential process that will help you define your personal goals, determine how much money you need to net, maximize your business value, and select an exit strategy.
The COVID-19 crisis is a strong reminder that we are not in total control of our businesses and we cannot simply choose an exit date. We never know when challenges will arise and the opportunity to exit may disappear. Rebuilding your business with your exit plan in mind will enable you to determine how much you need to grow before you can exit, stay focused on what really matters, and maximize your wealth.
High-quality, profitable businesses and well-prepared owners will be well positioned to exit and achieve their goals when the market recovers. Take control of your future and be ready to go to market on the rebound wave.
Jane M. Johnson, CPA, CM&AA, CBEC
Jane is the President of Business Transition Academy Inc. and is the co-author of Cashing Out of Your Business – Your Last Great Deal.
Jane created Business Transition Academy in 2013 as an educational platform to provide the most comprehensive, impartial exit planning education, tools, and resources to business owners. Their best practices and information empower owners to make more informed critical decisions about their exit and improve their chances for a successful outcome.
Jane is a CPA, Certified Merger & Acquisition Advisor, Certified Business Exit Consultant and a trained family business advisor.
BTS News
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Prepare for the Market Rebound
For many business owners, the economic effects of the COVID-19 pandemic have been devastating – especially for those who were planning to sell their businesses.
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Using Downtime to Add Value
As business owners are working to process the impact of COVID-19, we’re looking at how it will affect M&A. The good news is that many companies and private equity firms have been doing well for year
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Are Buyers Still in the Market?
We believe that mergers and acquisitions will continue once the current crisis ends...based on the volume of inquiries from private equity funds, search funds and well-funded individual buyers.
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Use the Threat to Better Prepare
Today there is a lot of uncertainty about the future of business...there are things you can do to prepare for an eventual sale of your company– especially now.
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Crisis Shows Ripple Effect of Business
Our focus at BTS is on small companies that are the backbone of the economy...This gives us exceptional insight into what it is like to be owner-operators.
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Dealing with risks in a company sale
The passing last week of Harvard Business School professor Clayton Christensen – famous for his theory of business disruption - is a good time to consider business risk.
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M&A Advisor Tip: Earnouts Can Break a Deadlock
Earnouts can be used to address a perception of risk faced by a buyer. They also are used to bridge a valuation gap between a buyer and a seller.
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Changes by owners helped a sale
Owners considering selling can look at the experience of a N.H. company for ideas of what to do to increase their chances for a good transition.
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Advisor Tip: Don’t lose your focus
Don't let those future plans distract you from what's going on today.
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Growth Methods Used by Buyers
We often hear from founders who feel they have hit the ceiling with what they can do with their companies. Buyer groups in the market see this as an opportunity.
Case Studies
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Precision Machining Company
Initially, liquidation was a serious consideration. It would offer a quick exit but would hurt loyal employees and disrupt the customers who had come to rely on its quality production.
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Green Product Company
Our client owners could dig in for the long haul…However, this would take five years or more. Owners simply lacked the horsepower to do it.
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Water Purification Company and Young Buyers
Owners decided they wanted to retire. They also wanted to be fair to the staff who had been loyal to them. Could the company be sold, the staff retained and the facility remain in use?
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Magnetics Company with High Profile Customers
(T)he manufacturer would need to focus on growing EBITDA to capture interest from major strategic buyers and achieve a higher multiple of earnings.