The COVID-19 pandemic brought a wave of uncertainty to nearly every type of business in the United States. Large and small business owners were forced to face the question of whether they should resume their day-to-day operations or temporarily shut-down for an unknown period of time. However, given the uncertainty of the economy, it’s reasonable to want to put selling plans on hold.
If you’ve contemplated listing your business for sale, you may be wondering whether or not you should move forward. As you decide between selling a business during COVID-19 or waiting until next year, it’s important to get a better picture of the market. Despite economic uncertainty, M&A Source and the International Business Brokers Association’s (IBBA) Q3 2020 Market Pulse Report mentions that there are still pandemic-resistant businesses in demand. Keep reading, as we go over some of these sectors more in-depth.
It’s safe to say that it’s a buyers market, rather than a seller’s market. This statement is especially true for industries struck hard by coronavirus, like restaurants and retail stores. However, some industries weathered the pandemic quite well. According to some M&A advisors, 25% of businesses they partner with are either thriving or remain unaffected in quarter three. If your business falls underneath one of these three categories, it may be time to start planning your exit strategy and begin the selling process.
After a setback following the recession, the construction and engineering sector made a comeback in more recent years. They now contribute over 4% of the country’s GDP and surpassed over 1.2 billion dollars in U.S. expenditures. If you’re considering exiting this market, 2021 may be the year to list your engineering or construction company for sale and find a new owner.
Although they suffered a negative growth rate since 2015, manufacturing businesses are pulling through and proving to be somewhat immune to the coronavirus pandemic. Rebounding commodity prices are also expected to promote a surge in revenue growth. With these favorable anticipations, buyers are now on the lookout for profitable manufacturing opportunities.
Similar to construction and manufacturing, business services as a whole are holding up well. Despite the pandemic, they’re still accounting for nearly 15% of industry sales in the Main Street and lower Middle Markets. Services like financial planning and law firms, in particular, are projected to rise in demand and see a growing customer base due to the ageing population and their increasing disposable incomes.
There’s no denying that Main Street businesses have taken the biggest hit from Covid-19. You’ve likely seen your fair share of small mom and pop shops close for good after experiencing plummeting sales. Ryan Cave, President at Sunbelt Business Brokers of South Florida, says despite a gradual rise in business listings, transactions may stay down in this industry, which in turn can affect asking prices and purchase prices amongst buyers and sellers.
“Sellers got the rug pulled out from them – retail, restaurants, personal services are all taking massive hits due to a problem they didn’t create. Buyers need to be prepared to pay a premium for businesses which continued to thrive during coronavirus.”
Despite the temporary setback in market conditions, Main Street restaurants continue selling. Recent data suggests that they account for roughly 20% of industry sales in market sectors below five hundred thousand dollars. Plus, CARES Act incentives are also boosting sales. These added cash inflows more than likely nudged potential buyers into making purchases they otherwise would have been more hesitant to place.
No matter what type of business you own, it’s crucial to weigh your options closely before deciding to sell. Working with a qualified business broker can help you get a better grasp on the sale process and reach an informed decision. For expert guidance and a no-obligation discussion, get in touch with the professionals at your nearest Sunbelt office. Our team can calculate an appropriate business valuation, find a qualified pool of prospective buyers, and close out your transaction for top dollar.