How to sell your business post pandemic
The COVID pandemic has many business owners asking themselves whether it’s time to sell or stay the course, to retire, or to step back and think about ways to revitalize their business. Unfortunately, while some small business owners actually thrived during the pandemic, others have just managed to hang on, while others have failed.
Even if your business survived the pandemic, the economic disruption resulting from the pandemic has led to a huge amount of uncertainty for small business owners. When taken together with other factors, such as possible tax and regulatory changes, many business owners are faced with making the decision to sell their business.
The good news is that it may be a suitable time to sell your business. Healthy stock market valuations, lots of private equity capital, accessible debt financing, and a macroeconomy that’s getting stronger are all positive factors if you’re trying to sell your business.
Selling a business is a complex, time-consuming job, even more so post-pandemic. However, the basics are the same, and the more prepared you are, the better your chances are of maximizing profits.
Determine how much your business is worth; consider hiring an accredited business appraiser. Generally speaking, a business is worth a multiple of its profits. Smaller businesses average 2-3 times the profit, but this depends upon the size of the deal as well as the type of business you own. The appraiser will draft a business valuation report, which is an assessment of the value of assets, taking into account all relevant market, industry, and economic factors.
The basic business records needed are:
- current capital structure,
- financial statements from the past 3 years and current year to date,
- tax returns from the last 3 years,
- profit and loss summaries from the last three years,
- and review your records with an accountant first.
Look beyond your clients and customers
When determining how much your business is worth, create a list of everything the business owns including all inventory and/or equipment and a financial statement showing all income and expenses. A few examples of other documentation include details of contracts, loan documents, shareholder agreements, and employee data.
Typically, the process for selling a business takes between 6-9 months, but selling your business post-pandemic could take longer. Whether you’re thinking about selling your business now or in the future, prepare now by enlisting the guidance and advice of qualified team of financial, legal and tax advisors who can help ensure you get as much—or more—out of the business as you put into it.
Moving on
Wondering what to do after you sell your business? Start a new business? Retire and invest the money from the sale to help you attain long-term financial goals, such as getting out of debt or adding to your retirement income? Or if you decide to keep your business assure you have a succession plan in place for a seamless transition into your retirement.
GYL is a full-service accounting, business, and tax advising firm, providing financial consulting services in Southern California. Call our office to schedule a free consultation. Our professionals at GYL CPAs and Advisors will go that extra mile to help prepare a transition plan to suit your individual needs as well as the needs of business.