How to Adapt Your Exit Strategy to Current Events

As COVID-19 clearly demonstrates, both personal and global situations can change. In fact, some things can change with surprising speed. The undeniable fact is that when economic uncertainty emerges, decision-making is inevitably impacted. Selling your business stands as one of the single greatest decisions you are likely to ever make. Considering the tremendous importance associated with this transaction, it is vital that you factor in current events when formulating your exit strategies.

Outcomes from the Pandemic

The pandemic has caused many to wonder about how current events should be shifting their thinking. If they can get a decent valuation and a healthy return, many business owners are currently looking to sell. In fact, quite a few businesses have soared in value during the pandemic. On the other hand, those who would receive less revenue might opt to wait. A lot comes down to timing and the type of business in question.

The Due Diligence Process

During periods of economic uncertainty, buyers are likely to send more time dealing with due diligence. They tend to dig deeper and spend more time evaluating every aspect of a business’s financials.

For example, if there are changes to the amount of money a business brings in, buyers will want to know how long this will be an impact. In a definite piece of good news, valuations during 2020 and 2021 have tended to factor in future projects and developments.

Along a similar line, during periods of economic uncertainty deals can take longer to close. However, during 2021, research shows that companies in the $5 to $50 million sector saw an acceleration in sale time. “What’s interesting is how quickly the $5 million-plus deals moved to the closing table. When the market is competitive like the lower middle market is right now, buyers will use speed to close as one competitive advantage in their purchase offer,” said David Riley in the International Business Brokers Association Market Pulse 2021 survey.

The Power of a Well-Run Business

While current events, especially those that foster significant social and economic changes, may cause shifts in the thinking of both buyers and sellers, the fact remains that the best-run organizations will continue to receive higher prices.

One excellent way to ensure that a business is well-run and well-organized is to spread the decision-making process through the company as opposed to in the hands of just one person. When checks and balances are in place, as this indicates a solid organizational structure.

It is quite common for people across the economic spectrum to hit the pause button on their decision-making until greater clarity is obtained. A key way to improve the exit strategy of any business is to work with business intermediaries, accountants, and lawyers well in advance. Many experts recommend working towards the goal of selling quite a few years in advance of selling, so as to develop a highly polished exit plan. Ultimately, the more experienced professionals that business owners have in their corner, the better.