Selling Your Business in 2022: It’s like 2020 Never Happened!

There’s a lot about 2020 we would all like to forget. Luckily, from a business-selling perspective, you might be able to erase that year entirely.

Businesses are generally valued based on their historical profitability, and we all know that 2020 was a challenging year for businesses.  But, with 2021 now in the books, we have a buffer year between present day and the haze of 2020.  That’s fantastic news when it comes to selling. It’s possible that you can leave the uncertainty of PPP Loans, mandates, and market turmoil off the table as long as you are able to show a buyer and a bank the following:

• You have a good story to tell: When selling a business, your story matters, now more than ever.  Everyone has a broad understanding of how the COVID-19 pandemic impacted the world, but you need to show specifically how it negatively impacted your business and your industry.  Share both high-level and exact details. Were you shut down for a few months, or were you deemed “essential” and able to stay open?  Help them to understand both why and how your business was impacted, and that it was a result of the pandemic rather than reflective of your business.
• You adapted: This goes hand-in-hand with your pandemic story.  While it’s important to show buyers and bankers how your business was negatively impacted by the pandemic, it’s even more critical to show them how you actively responded.  Share all the steps you took to keep things moving. Customer facing changes might be the most obvious and include curbside delivery, plexiglass partitions, social distancing, and so on.  Equally important, and perhaps more impactful, are the internal and organizational survival steps you took like building a remote workforce, cutting expenses, securing PPP and EIDL Loans, and other actions not evident to the public.  The goal is to show that you took proactive steps to not only survive the pandemic, but to ensure there would be no lasting damage to your business once a new “normal” arrived. 
• Your business has rebounded: This is where your story and your adjustments connect with today’s reality.  Your 2021 financials and books are finalized, and numbers have rebounded beyond where they were in 2020.  Wouldn’t it be great if buyers and bankers only weighed 2018, 2019, and 2021 in their decisions?  They might be able to do just that.  If 2021 numbers have rebounded and are in line with 2018 and 2019, they will be more willing to disregard 2020.  However, if 2021 was through the roof, even compared to 2018 and 2019, there may be some skepticism that the results were due to pent up pandemic demand that won’t necessarily continue.  The key is that, like all of us, buyers and bankers are eager to see things get back to normal.

If you can tell your story, share your adjustments, and show rebounded financials, 2022 will be a great year to hit the market with your business.