In COVID-19, General

March 29, 2020

I am not going to regurgitate the “trying times” and “focused on the safety and well-being” speech – you’ve heard it and if you’re like me, you know it.  Instead, below are some information and suggestions you can actually use:

  1. Small and medium business transactions are likely to take more time to complete. An experienced Business Advisor is more important now than ever. It’s not just about completing a transaction – it’s about completing your transaction at the highest enterprise value possible.  This means that you retain the maximum amount after closing and this requires experience in creative structuring and high level negotiating skills. Savvy buyers are entering the market that have been intentionally waiting for buying opportunities. These buyers will pay pre-pandemic market multiples if the Advisor properly explains the relevant financial recasting considerations. Additionally, we are seeing buyers include full-time employment or contracting provisions for sellers who want them.
  2. We are also seeing buyers that are interested in taking more control over their financial destinies due to being laid off or hours cut.
  3. Contact your landlord/mortgage company and inquire about rent/mortgage payment abatements, deferrals, refinancing and/or permanent rate reductions. Delta Business Advisors is a member of several organizations and we are seeing that these requests are now the norm. They are expecting to be asked and those who inquire first are most likely to see the benefits sooner. You may choose to do this for your residence as well.

Cheesecake Factory and other Fox Restaurant Concept brands told landlords they wouldn’t pay rent in April due to sudden decrease in business. In the letter, Overton explained most of the company’s restaurateurs had to switch to delivery and to-go orders and some even had to close completely due to the spread of COVID-19.

“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business,” Overton wrote. “ Unfortunately, I must let you know that The Cheesecake Factory and its affiliated restaurant concepts will not make any of their rent payments for the month of April 2020.”

Overton went on to say the company hopes to resume payments soon, he “cannot predict the extent or the duration of the current crisis.”  Read Full Article

  1. The SBA is offering “Economic Injury Disaster Loans”. If you have the need, apply now. There is a huge amount allocated, but it will not last forever. Again, take action sooner than later. https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources#section-header-0
  2. AZ has COVID-19 Business Resource page https://www.azcommerce.com/covid-19, including workforce, financial support and more.
  3. Also, Facebook is offering small business grants https://www.facebook.com/business/boost/grant and resources https://www.facebook.com/business/boost/resource.
  4. The value of your business has not decreased to the extent of the public markets. In fact as time goes on there may be little, if any, impact to business values. Small and medium business valuations will recast much of the temporary economic impact to your profit and loss as a one-time, non-recurring event. Lisa Riley, Delta Business Advisors’ founder and Principal Broker has been recasting financials for almost 10 years and understands what can and cannot be included.
  5. If you process credit cards and are giving refunds or accepting returns, offer to make the refund by check. This saves you the return merchant credit card processing fees (generally ~3% of gross sales).
  6. In businesses with physical inventory return eligible inventory that has become ‘excess’ as a result of social distancing. Cash is king, you can reorder later and they will be happy to sell it back to you.
  7. Don’t start too soon – The final version of the Families First Coronavirus Response Act was signed into law on March 18 and goes into effect on April 2, 2020. The law focuses on paid sick leave and expanded FMLA provisions, including:
  • Emergency paid sick leave: Full-time employees of employers with fewer than 500 employees that are unable to work due to COVID-19 are eligible for 80 hours of emergency paid sick leave. Part-time employees are eligible to receive the equivalent of the number of hours they would work, on average, during a two-week period.
  • Expanded FMLA: The law expands the FMLA definition of employer to all employers with fewer than 500 employees, and expands the definition of a covered employee to include all employees who have worked for covered employers for at least 30 days. This means more employees will be eligible for up to 12 weeks of unpaid leave. https://www.dol.gov/agencies/whd/fmla/pandemic

For more information, see the Industrial Commission of Arizona resources page – https://www.azica.gov/resources/employers.

Lastly, consider using this time to make improvements that you have been too busy to start. Here are some ideas:

  • File your 2019 taxes. There is a 90 day filing and payment extension, but if you have the time to work on them now you should. We all hope to be really busy later.
  • Install a firewall at your home office. Hacking reports are up exponentially as hackers know many are working from home with less secure networks. We use Watchguard (www.watchguard) here at Delta Business Advisors, attached is a review of the top small business firewalls from Gartner https://www.gartner.com/reviews/market/network-firewalls.
  • If you have inventory, go through it (return excess per #5) and throw out stale/dated/damaged goods.
  • Consider offering gift cards or gift certificates perhaps at a modest discount to help even out cash flow (make sure these are recorded as contingent liabilities until redeemed).
  • Consider a Groupon or similar offer (but be VERY careful not to sell below your real cost. This is not new client acquisition – it is cash flow management) again this is a contingent liability until redeemed.
  • Perform a deep cleaning in areas that haven’t been recently.
  • Update your website, PPC/SEO campaigns.
  • Update your company social media pages.
  • Update your personal CV or resume if used in your business.
  • Review and update your marketing materials.
  • Think creatively about how you can continue to deliver your goods/services to clients.
  • Print a profit and loss statement and look at expenses line by line then cut all non-essential costs.
  • Consider implementing a CRM system, a new point of sale, or other automation software tools.
  • Take some time to research new vendors and products that are complementary to your business.
  • Forward this to a fellow business owner.
  • Shop local and support your fellow business owners.
  • Consider giving blood as it is in short supply.
  • Join a virtual networking group and participate at least until quarantines are lifted.  There are plenty of groups on Linkedin or another alternative is to work with your organizations or create your own virtual groups, Happy Hours, Coffee Klatches, etc.
  • Spend some time on social media discussing what you are doing business-wise to make good use of this time (feel free to steal from this list).
  • Ask for referrals!
  • Remind your clients of products/services you offer that they might not know about.

If you know anyone considering selling their business, we’d love to talk with them! We are here to help and support business owners 365 days a year, whether there’s a pandemic going on or not. Delta Business Advisors not only sells businesses, we also provide a complimentary analysis of the most probable sales price for those businesses with revenues less than $5M, appraisals (if needed) as well as Buyer Representation for those looking to grow through acquisition or become a business owner.

Let us know how we can help.

Stay Healthy and Safe.

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