8 Lessons from a Buyer: Selling Your Business During a Pandemic
Selling a business during a global pandemic is different. What isn’t? Often we see this presented through a case study from the viewpoint of the seller or even the business broker, including those in our own case studies that can be found here. However, it is less frequent for us to hear about selling a business from the viewpoint of a buyer.
Think of it this way: often selling a business is the single most significant event in the life of a business owner. It may fund their retirement, move them into another venture, or help them take the next step in their lives, whatever that might be. But the sale is equally important to the buyer when you are talking about an individual rather than a private equity group or a major company.
The buyer may have the same eventual plans the seller does. They are just at the beginning of their journey rather than the end. But we can learn from a buyer’s experience buying a business during a pandemic. An anonymous buyer shared their search for a business with Searchfunder, and here is what we can learn.
First, it is important to note that the buyer chose to search for a business through a broker, mainly because the broker had already filtered out those businesses who were not sure about selling. That way, the buyer could be reassured that the seller would not back out of the deal.
Here are eight other takeaways from the buyer’s experience of buying a business during a pandemic.
Be Flexible and Ready to Adapt
Whatever plan you had post-closing of the purchase of a business, be ready to re-write it and re-write it again. As a seller, you may have to stay on longer and ease a transition with employees working remotely, invoicing and collections being delayed due to customer hardship, and the need to implement changes in the business model to meet the “new normal.”
The buyer must be prepared for the same thing. What you thought was going to happen after buying the business has changed as customer and client behavior has changed as well.
Establish and Maintain Trust
What’s the real value of a business? That can be a moving target right now, and if business owners and brokers are not honest about what is actually happening in an industry and the business itself from the start, the buyer can quickly discover this during the early stages of due diligence or before.
This not only damages the business integrity and that of the broker if one is involved, but it kills the sale immediately and may make other potential buyers equally wary. Trust is the key to selling any business, and establishing and maintaining it throughout the process is vital.
Manage Expectations for Yourself and Your Buyer
Why are you selling your business? The likely reason is that you are ready to retire, burned out, or ready to move on to your next venture. So be careful what you promise the buyer. If you think you can stay on for 3-6 months and lead sales, you may be wrong. It’s natural for you to want to check out and move on: just be sure the buyer knows this.
As a buyer, don’t take what the seller tells you for granted. They may very well have the best of intentions but staying on and working a business they may have been in for decades is tiresome at best. The sense of relief they feel at selling may translate to less than optimal performance on their part. Be ready for, and not resentful of, that moment when they honestly tell you, “I’m done.”
Keep Recruiting in Mind
We often talk about when the best time to tell your employees you are selling the business is but realize no matter what that timing looks like, inevitably some employees, and perhaps key ones may leave upon hearing the news.
For both buyers and sellers, this means having a recruitment plan. If inevitably you will lose personnel when the business sale closes, be ready to hire replacements and do so quickly. As a seller, this means you may have to stay on and assist these new hires in getting up to speed. It is best to think of this before the sale, not scramble to deal with it after.
Introduce New Owners to Customers and Clients ASAP
Along with employees, this is another common point for debate. Introduce customers or clients to new owners too soon, and you risk them leaving before the close of the sale. Wait too long, and some will feel betrayed for not being told sooner. As an owner, you know your customers and clients better than anyone, and you know which ones will respond best to new ownership and which ones might be more resistant.
You will have to judge the best time to introduce a new owner, and certainly not until the deal is officially closed, but the sooner the better, for both your buyer and your clientele.
Get Easy Employee Wins when Selling a Business
You’ve won the trust of the buyer, or the deal would not be going through, but your buyer needs to win the trust of your employees, and the seller can help. Look for easy wins that make their lives easier and the transition smoother without costing the company and the new owner a fortune.
For instance, in these times, a small telecommute stipend or a one-time grant for home office renovations or setup could go a long way. Time will be the only sure way to gain trust, but little initiatives can certainly make things easier for both the buyer and staff.
Make Timely Decisions when Selling a Business
No matter how hard you try, you’ll never have 100% of the data you may feel you need to make decisions. A buyer may spend months on due diligence, and still not have all the answers. They’ll need to trust the seller and their instincts when it comes to a purchase decision.
The same is true of the seller. You may not be right 100% of the time. But you need to make decisions in a timely and meaningful way. One of the biggest reasons a deal can fall apart is time: take too long to respond to a negotiation request, and the buyer may walk away. You’ll probably look back and see mistakes or things you could have done better. So will the buyer.
But the biggest regret you’ll have is failing to make a timely decision and having to start the process over again.
Pay Attention to Connected Details
Remember, things are not always as they appear. The buyer may have other investors helping them or may have plans for your business that differ from what you would have done. Promises made outside of the written contract may or may not be valid. Make sure you are comfortable with details and do research of your own.
As a buyer, realize that the three customers you see on the balance sheet may actually be one: three locations for a single company, or something along that line. Look deeper for connected details. Pay attention and understand the implication of potentially losing three customers instead of one in the transition.
But also remember you won’t see everything at the outset. As a seller, you will learn more about the buyer and their future plans for your business after you sell. Sellers will discover hidden quirks or unexpected details after the purchase.
If you are selling a business, remember the buyer sees things differently. Try to put yourself in their shoes when you are discussing details or due diligence. Have a transition plan, but be flexible.
As a buyer, understand that the seller is ready to move on for a reason, and they may have significant plans for after the business is sold. Respect the hard work they have already put in, and be prepared for them to move on as soon as possible.
Do you find yourself ready to sell your business based in California? Do you want to know what your business is worth before you make that decision? Contact us today at Rogerson Business Services. We’d love to help you with a business valuation, and we’d love to be your business broker when you are ready to sell.
