04 May COVID-19, The Selection of New Clients and Exit Planning and Business Consulting
During our industry veteran roundtable discussion last week, we asked our distinguished group of experts a series of questions regarding the COVID-19 pandemic and how businesses should proceed. This is our first article on this webinar, which was packed full of insight and actionable information.
The panelists for this discussion included Bob McCormick, Managing Partner at Murphy McCormick Capital Advisors; Scott Bushkie, Founder and President of Cornerstone Business Services; John Howe, past chairman of the M&A Source and current chairman of the International Association of Business Intermediaries; and Sara Burden, President of Walden Businesses.
The Case of Taking New Clients
The first question centered around the determining whether or not new clients will survive. Business brokers, of course, must be paid for their services. So, it is essential that any new clients you bring on will ultimately be able to pay.
Bob McCormick had some important thoughts on the subject. One key piece of advice McCormick shared was that it is more important than ever to perform due diligence. It’s essential for business brokers and M&A Advisors to truly understand prospective clients and what they are getting into before taking on any new clients right now.
On this point specifically, McCormick stated, “I think we just really need to be individually very disciplined on taking on new engagements…there’s the potential to rush in and take engagements to fill the pipeline when you think you’re going to go into a recession…but you can end up wasting time on non-valuable engagements.”
In short, brokers should be thinking about efficiency and whether or not a particular client is really a logical choice. You should refrain from rushing in simply out of fear of not having enough clients during the pandemic. Scott Borsky echoed McCormick’s thoughts noting that it is best to pass on some clients. He asked, why not let your competition waste their time on them instead?
Consulting and Exit Planning
The second question poised to the panel was, “Would you do any exit planning or business consulting projects at this time? If so, how would you structure them?”
Panelist Scott M. Bushkie felt that it is essential to evaluate your own skill set. In particular, Bushkie felt that brokers need to think about their past experiences and what they can bring to the table in terms of helping clients. Understanding what the right time for a client to exit and how much money they need is, of course, of paramount importance.
McCormick added that it is necessary to be “disciplined in what you take on.” He advised to, “look at the opportunity cost of hours you put in on an exit plan versus the number of hours you put in on a lower middle market.” McCormick feels that it is essential to collaborate with others.
Panelist John Howe added that it’s important to “dive into the trenches to figure out how to make the businesses healthier.” Generally, the panelists agreed that where exit planning and business consulting projects are concerned, it is important to be discriminating with bringing on new clients. They also suggested to potentially work with partners on exit planning and consulting and to carefully evaluate how much time would be involved in specific examples that might cross your plate.
Dealing with the challenges of the COVID-19 pandemic means carefully evaluating prospective clients. It is important for business brokers and M&A Advisors not to panic. Instead, they should carefully select what clients they will work with and what types of projects they will ultimately take.