I was wrong. I’ll admit it. Go back a year and then I thought a lot of distressed companies would hit the market in Q2 and Q3 of 2020. They didn’t, at least not a massive amount of them. So, what happened?
PPP and other government loans saved a lot of businesses from going under. A client of ours saw her customer base put on severe government restrictions. Her company was allowed to remain open but there weren’t many customers to sell to. Without both PPP loans the company wouldn’t have survived. Add to this the Main Street lending program and the Restaurant Recovery Act and a lot of jobs, and businesses, were saved.
I’m starting to see more hurt companies on the market. The owners have just had enough. The problem is most of them aren’t salable, aren’t financeable (at the price the owner wants), and the only logical buyer for them may be someone in a related industry, who can consolidate.
One problem is the owners still see their business as it was in 2019 while the buyers and banks see it as it is now. I get it. When talking to owners about their future the optimistic-entrepreneur side comes out, as it should. What I don’t get is when they’re working with a broker to sell the business and the broker obviously hasn’t looked them in the eye and told them to fix the darn thing before trying to sell it (FYI, there are brokers/intermediaries who do this and actually help the owner fix it before selling).
In real estate, residential or commercial, it’s a lot easier to estimate the cost to rehab a building (assuming a top-notch inspector was involved). With a business, it’s not that easy. You’re dealing with the marketplace, economy, customers, employees, and competitors.
Bottom line, if you or a client of yours wants to sell but the business isn’t ready take steps to get it where it should be in order to exit with style, grace, and more money. And now for a shameless plug, get our book If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want?).
“If it wasn’t for the effort, I could argue against hard work all day.” Janan Ganesh
“Being offended is the natural consequence of leaving one’s home.” Fran Leibowitz