We are living in challenging times, and in recent months, it has become apparent that businesses must adapt to survive Covid-19 uncertainties.
Whilst some sectors unfortunately continue to struggle, others are thriving, and it’s great to see that many local businesses are now showing signs of recovery.
If your revenues and profits have bounced back, you may have decided that now is a sensible time to find a buyer for your business and retire.
Although this might seem like the perfect plan, our advice would be to carefully consider the timing of your decision. Here’s why…
Most businesses are valued on a multiple of their maintainable, future earnings. Your pre-Covid figures may have been strong and consistent, and you may well be showing early signs of getting back to your original position, but you aren’t there yet, and the future still looks uncertain.
Buyers do not like uncertainty and manage that risk by structuring transactions accordingly – for example including conditional deferred consideration and earn outs. Likewise, sellers do not like uncertainty and most I have encountered prefer cash on completion.
Therein lies conflict and as a seller, you may have to compromise on price to complete a sale with the least number of future-related conditions.
If the numbers still work out for you, great. If not, you should reconsider the timing and think about what you can do now to improve the saleability of your business in the future.
These things take time, so contact an experienced adviser who will have your best interests at heart, and treat with caution anyone who says they can get you top price in the current environment.
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Enjoyed this? Read more from Jim Akrill, PM+M