TAMPA, Fla., Aug. 4, 2020 /PRNewswire/ -- Every single business has been affected in some way by the pandemic. Many have suffered significantly reduced revenues; some are flat, and some are up 40%. As a business owner, there are a lot of tactical decisions and consequences to worry about every day. It is also critical to carve out time to be strategic, so business owners do not miss the fact that their ship might be heading for an iceberg. COVID 19 has reminded everyone they can never be too prepared for unexpected events and the importance of looking into the future.
Iceberg Dead Head
According to demographic experts, baby boomers formed businesses at a rate 240 percent higher than the norm from the years 1976 to 1985. This fact is based upon data from the Small Business Administration, the U.S. Census Bureau, and the Department of Labor. The rate of business startup during this period was unprecedented in history.
So, why is this fact vital? Because baby boomers, who are now exiting their businesses in rapidly growing numbers, are headed toward a demographic "iceberg" that many of them may not fully realize. The supply of companies for sale may well exceed the market demand in the near future. Business owners do not want their net worth to be adversely impacted by an "inventory problem," or said another way, an oversupply of businesses for sale.
Know What the Business is Worth
Each year, the CEO should know whether their business value has grown, shrunk, or remained stagnant. Knowing its worth helps them prepare for the day when they may have to sell it as planned or unexpectedly. A person would not go three years without having their blood pressure checked. A business valuation is the same thing for the health of their business and allows them to reduce the unknowns and fix issues.
The drama, trauma, and fog that is the business world today require that CEOs get as clear as possible about their situation, options, and strategy.
Making A Decision
If COVID-19 has had such a negative impact on their business and it is no longer something that they are passionate about, then they may want to think about letting it go. It may be time to consider selling the business and spending more time with their hobbies and loved ones. There is an accounting term called "sunk costs." These are investments of time, money, and energy that are in the past. It is easy to throw good money after bad instead of facing the brutal reality, whatever that may be. One should consult a trustworthy M&A Advisor to help determine whether it is wise to continue the good fight or exit the business.
In his book "Finish Big," author Bo Burlingham researched business owners who were either about to go through the exit planning process, going through it at the present time, or had just finished the process. He stated that only one business owner in the study identified the right successor the first time. The message: leave plenty of time for setbacks and delays because they will undoubtedly occur.
The good news is that business owners can sell their company before a COVID vaccine is developed and distributed. It will take more tenacity, proactive actions, and creative deal structures, but they can successfully exit if they act now ahead of the crowd that is sure to follow them to the exit door.
Edison Avenue specializes in selling businesses with revenues of $2 million to $25 million throughout the US. "Our passion is helping entrepreneurs to successful exit."
SOURCE Edison Avenue