We are living through unprecedented times with a global pandemic and a recession on our hands. Many business owners have repeatedly asked themselves, “Do I stay and grow the business, or do I sell and go?” While we can give sound advice as seasoned business brokers, we cannot make the final decision for you. There are numerous reasons you may want to consider selling now. We’re going to explore each of these reasons to help you discern and establish your exit plan.
1. Sell NOW if you’re above 60 years of age
Baby boomers constitute a fair share of small business owners in the United States. To date, boomers have experienced the most recessions of any age group. Between 1945 and 2020, there have been 13 recessions in total. According to Barlow Research Associates, 40% of small business owners today are aged 65 years and above.
The long and short is that non-essential businesses need to assess the situation and ask the tough questions such as ‘Can the business rebound? Can funding be secured to resuscitate the company?’ Essential businesses have been somewhat lucky and some have even enjoyed a markup in their valuation. Regardless, business owners in the baby boomer age range should start thinking of exiting now.
If you’re running a business that has since closed doors, it’s not wise to attempt to hold onto the business in the hopes that you can dip into your personal assets to rebuild. If you’re fortunate enough to be running a business that’s flourished during these tough times, selling now is still a great idea because of the favorable valuation the business will receive.
2. Sell NOW and recoup your current business valuation
The future is uncertain. No one is sure when the current pandemic is going to end. The economy is already entering the first stages of a recession. And over 100,000 small businesses have closed doors forever. Don’t let all your hard work go to waste. Selling now may help you salvage something from your years of hard work.
A study published in the Q1 2020 Market Pulse Report reveals that an overwhelming 81% of advisors project business valuations to decline as the year progresses. As an SME owner, it’s only normal to believe that your business is worth a lot. However, this may not always be the case. The best way to get a realistic figure of the type of offers you can expect is to get the business professionally valued by a business broker. This business valuation will give you a starting place when negotiating with investors.
3. Sell NOW and get a head start with investors
The Great Recession killed off 170,000 businesses between 2008 and 2010. Within less than a six month period, we’ve seen more than 100,000 businesses shut down. What we’re witnessing is more brutal and catastrophic than what people ever imagined in 2008. As people begin to come to terms with what’s really going on there is going to be a flood of businesses-for-sale as companies go under the hammer.
By making a conscious decision to sell now, you can get a head start with investors and walk away with a potentially better offer than trying to sell in a crowded market. Think of it this way: If you’re affected, that means your competition is affected. If you’re thinking of selling, your competition is also probably considering selling their business. The more choices investors have, the higher the chance that you will be forced to lower the price of your business.
4. Sell NOW before taxes become more complex
The coronavirus pandemic has wrecked the economy of this country and the economies of countries the world over. The government rolled out massive relief packages which have increased national debt. With millions of jobs lost over the duration of the pandemic and hefty bailouts, government coffers are running dry. Inevitably the debt will have to be paid back and the vehicle through which this will happen will be – taxes.
With an impending presidential election in November, the stakes are high but more so for small business owners who are likely going to see an increase in the corporate rate, estate taxes, sales taxes, and various business taxes. A storm is coming and one of the best ways to shield how much you can expect to take home is to sell now before November comes along.
5. Sell NOW because investors are having the time of their lives
For investors, recessions are one of the best moments to purchase undervalued companies and assets. Contrary to popular belief that people don’t buy businesses when things are tough, the opposite is true for the monied-up. Investors are on the prowl, hunting for ‘best-buys’. For sellers who already had an exit plan of selling off their company, this may be a blessing in disguise.
How do you link up with such investors? The fastest way is to bring onboard a qualified M&A advisory team that has a rich network of potential buyers. Apart from introducing you to verified buyers, such M&A advisors can handle the negotiations, paperwork, and offer advice. You don’t want to have the deal drag on for months. An experienced business broker can assist in speeding things along.
Discuss your exit plan with experienced business brokers today
Are you worried about your business and need help on how to sell it during these troublesome times? Not sure where to start or how to get your business ready for an acquisition? Contact Sun Acquisitions for business advisory services. We’ve helped thousands of business owners and investors close deals over the years and we are well acquainted with the complex process of selling a business during a recession.
Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.