What challenges might I face when selling my business during a recession and how can I overcome them? originally appeared on Quora: the place to acquire and share knowledge, enabling people to learn from others and better understand the world.
Businesses are salable during a recession, but it really depends on the industry, your expectations, whether or not your business is operating on the 6 Ps, and how profitable the business is.
COVID-19, for example, has affected some industries more than others, such as the hospitality and travel industries. While it’s certainly possible to sell during a recession, if your business has been struggling, it may be best to wait to sell when your business is booming again, allowing you to maximize value. Buyers are prepared to pay a high price for profitable businesses that generate strong cash flow, allowing them to recoup their initial investment as soon as possible.
It doesn’t matter if your industry falters during a recession, however, if your business runs on all 6 cylinders, or 6 P’s, you will still be able to maximize value during a recession as these are the characteristics that all buyers look for in an acquisition. The 6 Ps are: People, Product, Process, Property, Patrons and Benefits.
People refer to the management and employees currently employed by the company. Engaged employees and permanent management teams can act as a driver of value because they are directly involved in the direction and growth of your business.
Products are the products or services offered by your business. When looking at your business, you need to ask yourself whether your product and your industry is thriving or dying, and whether it is serving a niche.
Processes refer to operating procedures and systems, policies and procedures, and SOP checklists. Your processes should be designed with the customer experience in mind and should be well documented.
Intellectual property refers to any intellectual property of your business, such as brands, trademarks, patents, databases, contracts in place, IP real estate, etc. Intellectual property can be one of the main drivers of value in your business.
Customers refer to your customers. Most important are the customers, because the customers bring the revenue to your business. You need a diverse and loyal customer base who will go out of their way to purchase your products and services.
And finally, profit refers to your company’s EBITDA (earnings before interest, taxes, depreciation and amortization). Do you have multiple streams of matching income and residual income? Remember, however, that profits are never a problem, but a symptom of not working on the other 5 P’s.
Making sure your business is running on 6 cylinders is key to selling during a recession.