“We were on track for our best Q1 ever, but two weeks ago, it came to a screeching halt. Do you think we should continue with our plan to sell the business this year?” Vince (not his real name) retained me six weeks ago to sell his company. He wanted to have the deal done by the end of the year so he and his wife could relocate to Arkansas to be closer to their children and grandchildren.
For the first time in my 40-year business career, I didn’t have a clear answer to a client’s question. I’ve lived through recessions, stock market collapses, and terrorists flying into buildings. I’ve extensively studied American economic history and observed how our nation has responded to things as varied as dust storms and world wars. I’m usually comfortable drawing on these lessons to have some logical judgment about the future.
This time, I’m not sure. We don’t know what we don’t know about this crazy virus. Even worse, in a partisan media environment, we’re not even sure who to trust for information. We are all flying blind.
However, I do know this: once we are through this, whatever it is, we will be stronger. New businesses will emerge, heck, it’s likely even new categories of business will emerge! Companies with good margins, conservative capital structures and strong culture will be more dominant than ever. Culture is almost more important than anything else. In a big-time crisis like we’re in now, it’s not the strongest that survive, it’s the most adaptable, and that’s a function of culture.
So how does this apply to the world of buying and selling businesses? When one company is buying another, the buyer’s primary concern is the stability of the seller’s future income stream. So until this current cloud of economic confusion and fear is lifted, Vince’s company will not be able to confidently forecast its future. Given that, I had to tell him that getting a deal done in 2020 was probably unlikely. Vince then said something powerful, “I feel like I’m walking on a tightrope blindfolded. Not sure I will fall, or if the fall would even hurt. Then again, the fall could kill me, but I guess I just have to keep walking.”
Vince and I will keep walking together. We do not intend to sit on the sidelines and just wait out this economic uncertainty. I believe opportunity finds the prepared. I will continue to work on developing the target buyer list, and writing the executive summary and confidential information memorandum on Vince’s company. When the fog lifts (and the fog will lift), we will be ready to hit the market. Good companies and financially-strong private equity groups will be buying, and we will be prepared!
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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