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When COVID is the “Next Buyer’s” Problem

Business Sales and M&A Specialists

As we continue to take companies to market during COVID-19 period, we’re asking new questions about business response plans and resilience. It’s been interesting to see the different attitudes and approaches.

Business owners who are burnt out are very much taking a “sell now and let the next person deal with it” approach. We’ve been in phone interviews where you can practically “see” the dismissive body language on the other end of the line. “Remote work? Yeah, I never really believed in that,” one owner said.

This company does have some remote work capabilities, but the systems aren’t fully accessible outside the office. Illness and reduced hours have caused some capacity issues in their manufacturing center.

Although the company’s products are in-demand and they’ve done well this past year showing their resilience, I can almost guarantee they’ll be leaving some money on the table because the new owner will have to take the time, energy, and investment to carry the company into the “new normal”.

Change is challenging in any business transition. Surprise, buyers don’t like it. The more changes the buyer has to implement, the harder the transition is for them and the employee team. That means more risk and risk translates to lower valuations.

Planning for the Worst

On the flip side, we talked to another business that’s been doing well and is considered an essential operation. They were in a good position with remote work before the pandemic started and put their contingency planning into overdrive when COVID hit.

They’ve identified primary and secondary backups for all key employee roles and documented core job processes. In terms of their supply chain, they ramped up efforts to diversify suppliers and establish alternative resources for product components.

They even developed ways for their assembly teams to take work home, with kits that can be assembled away from the office. That’s been beneficial for staff under mandated quarantine as well as for some parents who now need to be home supervising school-age children.

As we’re taking this company to market, they’re going to get a higher multiple than they would have pre-COVID. That’s not only because they’ve continued to thrive and grow through the pandemic, but because they already have strategies in place in case things get even worse.

They’ve fined tuned their processes, creating ways people can work with flexibility and still get the job done. They’ve diversified their supply chain and developed relationships with secondary suppliers. They’ve documented their business and cross-trained their people.

That all looks good in the eyes of a buyer creating stronger interest and value.

Resilience Matters

These are tough times. We may have many more tough months ahead. Resilience matters, not just in terms of today’s pandemic, but because the global business environment is becoming more unpredictable.

Issues of technology, global politics, inequality, and climate are accelerating the pressure on businesses to stay agile. COVID-19 is today’s challenge. But conflict, instability, and future health emergencies could, in a very real and present sense, be in our future.

Managing for resilience requires long-term thinking and a willingness to plan for things that are unknown and unpredictable. For some businesses, that could mean investing time and effort into systems they may never have to use.

Investing in contingency plans you don’t use is hard. But I’ll take that over contingency plans I do have to use any day.

Building a SWOT Habit

In truth, we work with only a few companies who have a strong habit of regularly assessing their strengths, weaknesses, threats, and opportunities SWOT analysis). But this is the very exercise, the skill, that organizations need to develop.

It takes practice and discipline to read the marketplace, acknowledge limitations, and learn how to prioritize risk reduction efforts in a way that makes sense. Practicing this work is a good challenge for your leadership team. It’s good for your business and your value… and it could be the work that carries you through the next crisis.