Did You Know That Your Business Can Be Worth More In This Time?
Takeaway: One-time occurrences are typically normalized through adjustments when determining business value. We believe the pandemic will be treated the same way.
We get asked this question almost every day – “Is it still a good time to sell my business?”
The answer is YES – in fact, your business may be worth more now.
How is that possible? Well – let us explain:
Businesses usually sell for a range of multiples of earnings, called EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization). These earnings are adjusted to account for one-time, non-recurring, or non-essential expenses, events, and income.
Adjusted Earnings = Normalized Earnings
Our world has never seen a pandemic like we have with the COVID-19 situation. In our experience, and through our discussions with buyers, we have determined that the mergers & acquisitions markets will adjust financial performances of businesses in the same fashion that they have been utilizing adjusted earnings historically.
In other words, many business buyers will see this period of time as a one-time occurrence, which can be considered an adjustment to your earnings for 2020.
Your business is worth the same as it was pre-COVID-19, and it could be worth even more.
If your business was determined to be an essential business, or remained operable during the shutdowns, then your business could be worth more due to being independent of economic factors that normally cause negative impacts to other businesses. Even if you lost sales, your business still has value in its ability to weather the storm during a pandemic.
Business Buyers Are Still Looking to Buy amidst the COVID-19 Pandemic
- SBA Debt Relief efforts are incentivizing Small Business Lenders and Buyers. “As part of SBA’s debt relief efforts, The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months. The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.”
This is a huge incentive. The government is giving buyers free money! Origination fees are waived, as well as the first six months of payments AND interest.
Private Equity Groups have just as much, or more, money pooled as they did a few months ago. They are flush with funds and motivated to grow their investments. They cannot do that if they stop making acquisitions.
If you were already thinking about selling, don’t wait out the crisis or shutter your doors. Let us help you make the most of this market and get your business ready to sell. There are still buyers out there. And, for reasons already discussed, it is highly likely that we will see a seller’s market in the near-term.
If you would like to confidentially discuss your business goals, please call or email us and let’s get the conversation started.
We are here for you if you have questions about selling, and ready to help you get started when you are ready.
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