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Successful investors know business owners are struggling now and have been buying them out. So should you sell your business now or wait for better economic times?
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The U.S. economy was doing exceptionally well until the COVID-19 pandemic hit. Once states began issuing lockdown restrictions and stay-at-home orders, things took a dive. Even as states reopened, businesses have had to follow limited capacity and social distancing guidelines, which has made doing business difficult.
When business is slow or stopped, it can seem like all your hard work is going to waste. If you can’t maintain profitability, you don’t want to keep digging yourself into debt.
Successful investors know business owners are in this dire position and have been buying them out. Despite hard times, many businesses waver on the decision to sell because they don’t want to experience seller’s remorse. However, sometimes selling is the only reasonable option.
Have you received a letter of intent from an acquisitions firm?
If you’ve been approached by a merger and acquisitions firm with an offer for your business, you might be wondering if you should sell.
On the surface, selling your business might sound like a good idea. There’s no telling where the economy will be in the next few years. It may take years to recover. By that time, you could be so far in debt that it will take decades to become profitable again.
If you accept an offer to sell your business, you’ll get access to fast cash and you won’t have to worry about finances for a while. However, if you give up your business, you’ll be giving up a potential source of income that you spent a long time building.
Should you sell your business to a merger? Maybe. It depends
When you need money now, you don’t have time to wait for the economy to get better. Selling your business is probably wise if:
- You’re in a dire situation such as facing eviction (personal or business-related)
- You can’t catch up without digging yourself into more debt
- You don’t have time to wait a year to see if the economy recovers
- The company presenting the offer is respectable and will treat your customers right
While these are all good reasons to sell your business, there are an equal number of reasons not to sell your business:
- You have the finances to ride out the economic standstill
- Your brand is your pride and joy
- You enjoy running your business and working with your customers
- Quality control is more important than a temporary loss of profits
Obviously, not every business can afford to ride out the economic standstill. Nobody knows what the future holds and there’s no telling when or if business will return to normal. With that said, you need to make your decision about whether or not to sell your business based on your current needs and your future goals.
If you can’t hang on for at least another year, you should probably sell. If your business is likely to be shut down with another round of lockdowns, you should probably sell. But if your business is considered essential or you can switch to operating entirely online, selling your business may not be necessary.
The world is moving to a digital commerce platform
Businesses that can operate online during hard times are going to recover better than businesses that require people to visit their stores in person. If you can move operations online, even if you need to alter your business, don’t sell. Try to make your business work online first. Granted, that won’t be possible for certain industries that require in-person visits like therapies, kids’ playgrounds, and pizza parlors.
Don’t hang on to a failing business for too long
If you can’t make your business work on the internet and you’re at risk of having to shut down again, consider merger offers seriously. While your business may not be failing in traditional terms, being unable to operate normally for a long period of time is technically a slow failure.
Don’t hang on to a failing business longer than you can afford. Organizations that buy other businesses can afford to ride out the hard economic times. If you can’t ride it out financially, it’s time to sell your business now.