Ellen McIlhenny - “The Smart and Savvy Exit – What to look for in a potential buyer”
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It occurred to me this weekend that one of the things I had not really researched was how the pandemic affected business sales in the United States.
Well not surprisingly it really has been dependent on how pandemic-proof your business is. We know that there are some industries that have thrived during the past year; ones that offer help to people and businesses adapt to new lifestyles and working conditions.
By mid-year last year of the businesses that were able to sell, median sale prices rose by about 6%. This comes from the online marketplace for businesses, BizBuySell.com. But numbers of transactions dropped 39% from 2019. There were real winners and losers in 2020. As you might expect full-service restaurant owners were the hardest hit, many of whom were forced to delay plans for retirement from the business.
Also, not surprising is the mix of people who ended up buying businesses in 2020. Again, from BizBuySell, most were people who lost jobs due to the pandemic, others were existing owners looking to expand and those hoping for a bargain in the pandemic’s small-business wreckage.
Gyms and fitness centers were part of another business segment that was hard hit by the pandemic. Not only were potential buyers skittish on the outlook, but lenders were almost universally avoiding financing for businesses in certain segments. It is hard to justify valuations on businesses that had virtually no income last year.
In the coming year, of course the outlook is much brighter as more people are vaccinated and life slowly returns to normal. However, there will probably be a delay in the re-marketing of businesses in the hard-hit segments until there are at least a few quarters of numbers that indicate a turnaround.
Show Objectives - The Why
Today we will be talking about how to vet a potential buyer. You have spent too much time building your business to let someone who does not match your company values come in and potentially change or even ruin what you created. We will look at some of the qualities and intentions you should look for in someone wanting to buy your business.
Find My Podcast at https://pod.co/future-financial-confidence-with-ellen-mcilhenny
Next Week: Episode 12 of Season 4 – An interview with a Financial Advisor.
Written by Ellen McIlhenny
Owner of CFO Plus Services, a Fractional CFO services firm which also offers Back Office Bookkeeping Services. Author of the business novel The Big Turnaround; How Bad Management Nearly Destroyed an Exceptional Company. Check it out at https://thebigturnaround.com
You can connect with Ellen on any of her #cfoplusservices platforms or firstname.lastname@example.org
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