Is COVID-19 the ultimate cure for one-more-year-itis?

/in /by Exit Strategies

I was talking to a business owner who shared how her teenage kids remember the Great Recession and the financial impact it had on their household. Now they’re seeing their own economic upheaval, in the form of lost summer job (income) opportunities. In good times and lean, money issues have always weighed heavily on her mind. So, she can’t help but wonder how this will impact her children’s financial mindset.

I have similar thoughts, but I’m not thinking about my kids. I’m thinking about our country’s business owners. How will the COVID-19 pandemic affect their psyche?

I believe entrepreneurs tend strongly toward optimism. After all, 19 times out of 20 when I ask an owner about their sales projections, they expect growth. It is a good attitude to have, especially when you consider the strength needed to run a business.

But that optimism is also why so many business owners succumb to what I like to call “one-more-year-itis.” That’s the condition that leads owners to delay selling their business, even in a strong M&A market, even when the after-tax proceeds from a sale would more than fund their dream retirement.

Unfortunately, most small business owners don’t plan ahead. For the smallest businesses valued at less than $500,000, roughly 72% of owners do no planning at all before putting their business on the market. Even for larger businesses over $5 million, only about 25% plan more than a year in advance.

But as we come off the longest bull run in U.S. history to find ourselves in wholly unprecedented conditions, I have to wonder how long our country’s entrepreneurs will remember this struggle.

If there’s any benefit, perhaps more business owners will think strategically about their financial future. Instead of waiting to hit a certain age, or waiting for some trigger in their life, perhaps we’ll see more business owners planning to exit on their own terms.

Doing that means keeping tabs on how much your business is worth and creating a plan for your financial future, and selling when these numbers line up.

For further information on M&A market conditions or to discuss a business sale, valuation need or exit strategy, contact Al Statz, 707-781-8580 or alstatz@exitstrategiesgroup.com.