“For the last ten months, my business has been in a COVID survival mode. I can see light at the end of the tunnel now, but I’m worn out, I’m ready to consider an exit.”
Bart (not his real name) called to discuss selling the business he started in 2012. He told me it took a couple of years for the business to gain traction, but once it did he’s been quite profitable, until March 2020.
“I went from a monthly profit of around $12,000 to a monthly loss of $7,000. I could handle the loss for a few months, but without the PPP loans, I don’t know what I would have done.” Bart went on to tell me in recent weeks he has regained minimal profitability but doesn’t see a path to resume where he was for at least another year, or even more. “That’s why I want out,” Bart said, “I just don’t have the emotional strength to make that transition.”
I’ve had several calls like this the past few weeks. The common theme seems to go like this … we scraped by during 2020 but now we’re out of emotional, financial and physical strength to keep going into 2021 or beyond.
Now don’t get me wrong, these aren’t necessarily bad or failing businesses. Just like with Bart’s business, these are good businesses that have gone through bad times. But when it comes time for the owner to exit, the principles of transferable value have not changed. A successful business transition requires reliable financial statements, a diverse customer base, a sustainable revenue stream, a demonstrable growth plan, and owner independence. While 2021 will be a year of reckoning for Bart and many business owners like him, the basics of successful transition have not changed. My caution to business owners is to not wait until it’s too late to start the process. An empty fuel tank is not the right way to start down the long road of selling a business.
JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. Jim is the author of Home Run, A Pro’s Guide to Selling a Business. https://www.amazon.com/Home-Pros-Guide-Selling-Business/dp/1599329239 . He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The principles above are true, but the story, names and fact patterns are changed to preserve the parties’ identities.
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