What Doesn’t Kill You Makes You Stronger
When will the market for private business sales rebound? Small business owners who were planning to transition ownership and retire in the next few years are losing sleep over fear that they missed the market. The truth is, private equity groups and other buyers still have plenty of dry powder and are telling BMI advisors that they have the appetite to do deals. But many businesses have been operating in crisis mode or shut down altogether. The better question is: how do you stabilize your business during a crisis while planning for recovery and an ultimate exit? Don’t make decisions in panic mode; instead, put a plan in place and reimagine your business. It will help you sleep better at night.
Industries have been impacted in different ways and will recover in stages. One private equity partner estimated that 20% of businesses have benefited or been unaffected by the crisis — think about Peloton or Zoom. 60% are down but surviving; in large part, their success will be due to their ability to change course — like restaurant supplier Baldor offering home delivery, or Old Navy producing masks. The remaining 20% are severely impacted and may have difficulty surviving the downturn.
What are the processes and tools you need to implement so your business can recover and thrive? When the economy is good, there is a greater margin for error, and it’s easier to avoid making unpleasant decisions about underperforming employees, product lines, or customers. Now that the downturn has hit, all the cracks and ruts become visible. It’s not time to panic, it’s time to make the tough decisions. It’s also a good time to brainstorm new products and markets and address deferred maintenance, process improvements, and portfolio rationalization. A 2010 Harvard Business Review study, “Roaring Out of Recession,” analyzed post-recession winners and concluded that companies that pursue a multipronged strategy of “cutting costs to survive today and investing to grow tomorrow do well after a recession.”
In Part 2 of this article, we will cover the three stages of navigating from crisis to recovery: Stabilize, Strengthen, Reimagine. BMI has compiled a list of resources for business owners dealing with COVID-19. Our advisors are available for individual consultation, particularly for business owners who are concerned about the impact today’s decisions may have on a future exit. Contact us through our website.