Positioning your business for a post-COVID sale

For nearly everyone, 2020 has already proven deeply unpredictable. While many business owners may have thought that stability had come at last after years of Brexit-wrangling, those planning a sale barely had time to start the process before Coronavirus brought even greater uncertainty.

If you were planning to sell, but now find yourself in a battle for survival, what should you do? Here, we’ll take you through how you can navigate the current crisis and the subsequent recession and emerge from coronavirus stronger, with a better valuation and in an even stronger position to sell.

Gaining an advantage

Currently, large numbers of business owners are in a very difficult situation. As we previously outlined, many operators across the services, leisure and hospitality sectors have been forced into an extended period of closure and have either had to furlough staff through the Coronavirus Job Retention Scheme or let them go. But it doesn’t end there, as businesses across all industries have been impacted to some extent.

If you are badly affected, stressed and struggling to meet your obligations, it may be tempting to cut your losses and throw in the towel. Just remember, if you make it through the current lean times, you may find yourself in a far less crowded marketplace when it’s all over. Remember, in the current situation, you are not legally obliged to liquidate your business if you are unable to pay your staff or make the rent. Surviving may be enough to see your business emerge more profitable and more sellable than it might previously have been. Recessions always pass in time.

Keys to survival

So, with survival the crucial thing at the moment, how can you achieve this in the current climate? For a more in-depth exploration of this topic, read our insight on restructuring your business, but here are a few quick pointers that you get to work on immediately.

Downsize, shed unnecessary expenses, prioritise others

It may be difficult to strip back your company when expansion is what has driven you thus far. But, right now, downsizing may be the best way of weathering the crisis. Simplifying your business and making savings in any way you can will allow you to strip away unnecessary expenses, and allow you to focus on core cash-generative activities.

Whatever element of your business you don’t need, from property to equipment to certain members of staff or unnecessary contracts, offsetting it may be a key move in surviving the crisis.

Getting rid of expenses you don’t need will also enable you to prioritise those that you really need in order to survive. Make sure you identify those expenses you need to service in order to avoid debt or other related further costs. Your most important expenses might be rent, mortgages or equipment costs.

Work on your culture

If you have an existing workplace culture that you’re proud of and have put work into, you may be in a better position to ask staff to go along with your survival plan. The key is to ensure communication doesn’t slip at this vital time. Speak to your employees and outline what needs to be done to survive, to ensure that you have their full trust and that they understand that sacrifices and hard work will be necessary. Don’t forget to share with them your end goal and emphasise how worthwhile it will be when you get there.

Focus on cashflow

By and large, managing cashflow will be what gets you through a crisis or recession. Operating with limited debt will make it far easier than if you’re over-extended and servicing numerous debts. While government measures may have given some relief in this regard, this will only be temporary.

Owning your premises and equipment will help reduce your expenses. If you do own assets such as vehicles, something as simple as carrying out regular maintenance to extend its working life can make all the difference during financially difficult times.

Focusing on your sale

With emerging from the COVID-19 crisis as a viable business ready to sell to the highest bidder as your ultimate goal, here are some of the areas to focus on now, to ensure you’re in the best position possible.

Prepare your accounts

A complete set of management accounts showing the strength of your business before, during and after the crisis period will be a major selling point when the time comes to go to market. Ensure your accounts are as complete as possible, with comments explaining and outlining events and decisions, allowing you to illustrate the viability and resilience of your business, even in a time of extreme crisis.

Forecast what’s to come

Along with full accounts, producing a comprehensive financial forecast for the coming years will be another way to present your business as an irresistible prospect for acquisitive parties. Preparing documents such as balance sheets, profit and loss accounts and cash flow forecasts will all be invaluable in this regard.

The World Economics Forum predicts that “Survivors of the crisis will emerge as potentially massive winners at the end.” As the period following the financial crisis illustrated, the aftermath of crises can be boom times for the businesses that made it through.

The light at the end of the tunnel may seem dim and distant right now, but with the right actions you can ensure your business’s survival and, with the right preparations, you could emerge from the coronavirus crisis with an highly attractive business, ready to take advantage of a resurgent M&A market.

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