There is a significant difference between selling your business in a “pre-COVID” world and today.
First, what type of business best describes yours?
- Growing. You were able to deliver the right products and services that were needed during the pandemic. You have seen some crazy growth. You should be optimistic about the future and you are doing great riding this wave.
- Stalled. You see no to low growth for 2020 and possibly a drop in sales, but still feel that soon, things will start to rebound. You are probably feeling cautiously optimistic. No need to panic, but you should make some adjustments to jump on a faster growth track.
- Decline. You have seen a dramatic drop in sales that has already forced you to close or wind down soon. You are pessimistic on your current business, but probably already planning your next business venture (maybe in secret). You will be down for a while but not for too long as you will rebuild. You are probably cautiously optimistic, but stressed.
Depending on which type best describes your situation, selling your business today will vary dramatically.
On top of the usual “EBITDA+P” Earnings Before Interest, Taxes, Depreciation and Amortization, you may need to add P for Pandemic.
Planning to sell or not, I urge all channel partners to skill up and gear up to upgrade their business in the new digital-first business game. I have already shared many stories on best practices during the Pandemic. [Start by taking the free assessment test to learn your current strengths and weaknesses. Figure out how improve upon your weaknesses. Dig deeper with your customers to understand what you are doing right and wrong. Improve every day! Join a peer group so you can learn from the mistakes of others and feel good by sharing! Our Channel Partner Alliance‘s mother of all business building web portals is coming soon to help its member find everything they need to succeed, including an amazing business outcome achievement management tool. We have “virtualized” the entire business building experience!].
If you are an “older” channel partner who was already planning to retire from the channel within the next few years, it’s a good time to rethink your game. Even if you are doing well, you may want to do some soul searching to figure out what it is that you really want out of life.
Do you double down to ride out this storm or burn through your hard-earned cash? I know the entrepreneur in you is saying never give up, but you should take a step back and think deeper. Speak to a trusted financial advisor to get a clearer picture of your situation before you make any decision.
Consider your options:
- Double down and ride out the storm. If you have the buffer in cash, this could make sense. If you are just burning cash, reconsider.
- Pivoting to other services may be too little too late. It may take more financial and human resources than you should be risking at this time. That said, if your customer base is solid and you have the energy, funds and skills to pivot, then why not.
- Cut and run. Sometimes the effort and risk to continue just one more day is just not worth it. You need to think of your stress and health while battling the fires every day. Maybe it’s time to close shop. Of course you also need to consider the ramifications of closing like how much you owe against your company and personal assets. You will need a financial advisor and a lawyer.
- Sell. If you are in a difficult situation, most buyers will be beating you up to get the bottom dollar. You will probably be insulted when you hear what some buyers may want to pay for your business. Be smart and understand that you primary assets are your customer base, book of business, your skills and IP. Being many years in business is not as valuable as before. While your company may be declining on paper, your assets are still worth something. It is up to you to get the most money possible for those assets.
Many of your peers could easily look at buying your assets. This is the fastest and surest way that they can increase their revenues – literally overnight. If they are running a solid business already, then they will be able to easily digest your assets and make their business more valuable.
How you play your cards and structure the deal is key to getting the most for your assets.
Play the cards of selling your book of business, your skills and customer base. Show the buyer how you can bring incremental net-new revenue and higher valuation to their business overnight!
Payment for the business. This is where you may run into a challenge. Buyers may not want to pay you much because they smell blood or they may simply not have the cash liquidity. Those with cash reserves will probably negotiate a lower all-cash deal as they know they will easily recuperate their investment over time and they also know upfront cash is king.
If the sale price is not acceptable, work on a smaller lump sum up front + a monthly fee (salary figure) for you to transition the customer base + a percentage of the revenues coming from your customer base over a certain period of time and/or a reasonable percentage of the buyer’s company. Remember you are a business owner so you have some solid skills that they may need. Especially if you are not ready to fully retire, this can be a way to stay in the game.
Selling a business may be the best decision but how you sell it will determine how much you will get paid. Leave your ego at the door. Detach from the brand of your company. Put aside the hard work you did over the years. You are now at a crossroad and you need to make a decision for the rest of your life. You built something with hard work, but you need to know when to let go. Life goes on and nothing is worth loosing your health or happiness. In the end, it’s just money.
If you want to sell or buy, contact us and we will see if we can put you in touch with the right prospect.
At the last ChannelNEXT Virtual event on Managed Services, we held a workshop on selling your business. If you attended, then you got the inside scoop on how the buyers thinks.
Remember to attend our monthly virtual events on the LAST Wednesday of every month so you do not miss something you may need. You just never know what you will discover! Next event will be on October 28 on SaaS & Cloud. Book your ticket now! Or click on image below to learn more.