The COVID-19 pandemic is a medical crisis, but it quickly has become an economic crisis for most business owners. The crisis is affecting day-to-day operations and workforces, and impacting the financial strength and enterprise value. Even so, in the mid- to long-term, business operations are expected to return to normal and with enterprise valuations recovering as a result. (see article on preparing your business for sale)
You may be surprised to learn that in any given year roughly 20-25% of businesses choose to sell because of a crisis. It could be that the business owner or a close family member suffered a serious illness or accident. Or, it may be that divorce, unexpected economic news, or another personal circumstance intervened to change the business owner’s priorities. Suddenly, operating a successful business took a back seat to dealing with these pressing issues.
Without a pre-established exit plan, a swift change in personal circumstance or priorities can result in damage to the business and a less-than-optimal sale transaction. When a business suddenly loses the owner’s day-to-day attention, direction and passion, it also loses his or her strategic vision, capital resources, relationships with key customers and suppliers, and the rudder that kept the company moving forward. In short, without an exit plan, the value of the business can suffer a nearly-immediate decline.