COVID-Impacted Businesses and a Light at the End of the Tunnel
I’ve written several blog posts addressing topics around the question, “Should I sell my business during the pandemic? In these posts, I’ve often discussed how COVID-affected businesses are still sellable, but at a risk-adjusted price for willing Buyers.
As a business broker, it’s my observation that COVID has dramatically affected certain types of businesses, rendering them “distressed,” from a Buyer’s point of view. The value of these businesses has decreased significantly in parallel. However, with a vaccine on the horizon, how will the anticipated mid- to late-2021 pandemic relief affect the sale price of distressed businesses today?
Our business brokerage office has found that the answer has everything to do with risk. The longer the pandemic continues without improvement (actual or anticipated), the more risk there is for COVID-impacted Sellers to continue running their business – and the more risk for Buyers to purchase such a business. However, with the vaccine rollout gaining momentum, Sellers may feel less urgency to sell immediately, knowing that the vaccine result and associated economic recovery is on the way. As such, a Seller’s willingness to sell to any buyer at any price is suddenly mitigated.
Of course to be fair, there is still considerable risk even with vaccine rollout in progress. New strains of the virus may be resistant to the vaccine; it may take longer to vaccinate enough of the population to make an impactful difference than anyone anticipates.
Yet at some point in 2021, there will likely be a light at the end of the tunnel. As this occurs, our business brokerage team foresees that COVID-impacted businesses will no longer be selling at distressed business prices.
For San Jose CA Sellers of COVID-impacted businesses, consider whether you can ride out the remainder of the storm, and if you have the stamina to rebuild on the other side.
For Buyers of COVID-impacted businesses, the time to act is now. As we see signs of economic recovery as a result of positive vaccine impact, distressed business pricing will be a thing of the past… Like COVID-19.