29 Oct Around the Web: A Week in Summary
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A recent article from BizBuySell entitled “Business for Sale Market During COVID-19: A Paradox of Unique Opportunity and Uncertainty” discusses findings from BizBuySell’s 3rd quarter 2020 Insight Report. Data from recent business-for-sale transactions shows:
- Business sales are trending upwards
- Owner confidence has fallen
- Median sale prices increased 20% in the 3rd quarter compared to last year
- Asset sales are becoming more popular
- Many baby boomers are waiting to sell due to the pandemic
- Multiples are remaining largely consistent
- Businesses are taking longer to sell
A recent article from Axial entitled “The Fastest Way to Earn Your Earnout” discusses what sellers can do to trigger an earnout. As a result of the COVID-19 pandemic, many business sale agreements now include earnout clauses to protect the buyer’s investment. For sellers, this means their full pay day doesn’t come until the earnout clause is satisfied.
To help the business reach whatever financial milestones are in the earnout clause, sellers may want to focus on value drivers and simplifying unprofitable parts of the business. By looking at where the business makes money and where it loses money, strategies can be developed to spur profitable market share growth.
Four customer segments to consider include:
- Secure the Fort – High value customers that purchase high profit goods and services should be secured.
- Cut the C.R.A.P. – Low value customers that purchase low profit goods and services need to be moved out of this Can’t Realize A Profit segment.
- Change Lanes – Identify low value customers that purchase profitable goods and services and figure out how to service them at a lower cost.
- Go from Good to Great – High value customers that purchase middle of the road goods and services need to be handled with care in order to retain the customer while gradually shifting them to better goods and services.
A recent blog post from Exit Strategies Group entitled “Selling Your Business in the Covid-19 Era” explores whether or not it is a good time to sell a business. Business owners may be unsure due to the conditions related to COVID-19.
Three factors to consider when attempting to answer this question include:
- Market Conditions – Are there buyers and financing?
- Business Value – Will I get my target price?
- Personal Needs – What is my timing for selling?
These factors often do not align perfectly. That’s why it is important to start planning for a sale at least a couple of years in advance.