With all of the hype around Omicron, small businesses may face more lockdowns and other mandates that reduce consumer spending. Some may be forced to sell.
Omicron is the latest reported variant of COVID-19. Although there have been many variants between Delta and Omicron, this one has received a high degree of media attention. Governors are issuing mandates again as fears rise around the potential spread of the virus. In states like New York, these include mask mandates that have a direct impact on retail businesses. And, during the Great Resignation, employees are quitting or finding themselves distracted at home. For these reasons, some small business owners are considering shutting their doors or selling their businesses.
In an interview with Snackable Solutions, Marvin L. Storm of BX Advisors, a company that specializes in developing business exit strategies said, “You should never wait until the last minute to position your business for sale.” According to Storm, business owners should think about their exit strategy long before they plan to sell, and build their business in the direction of that end goal. This suggests that business owners who impulsively decide to sell their businesses in response to mandates and regulations that eat into their profits may want to take a step back to ensure that they position themselves for the best exit possible.
Storm says that a business owner can get another 100 to 200 percent for their company if they take reasonable steps before putting it up for sale. He gave the example of a company that renewed the lease on their property for a slight increase. At the time of sale, the buyer’s attorney noted that there was no transferable clause for the lease. This meant that the lease would need to be renegotiated. Consequently, the property owner tripled the rent, and the value of the business dropped by nearly half a million dollars. When signing leases, Storm recommends having an exit mindset when reading the terms.
Plan Your Exit Even if it Doesn’t Happen
Planning ahead for an exit may take many forms. As Storm indicated, one aspect entails reviewing lease agreements and other contracts. Another way to plan for the future would be to build digital infrastructure for a business. For example, a bricks and mortar store may devise a content strategy to grow their online presence, in order to mitigate the risks associated with operating in a physical space that is often leased and not owned.
In his book, “Transitioning from Employee to Entrepreneur,” Marvin L. Storm outlines a roadmap for entrepreneurs. Part of developing an ownership mindset includes thinking ahead about potential scenarios, such as exiting a business. With Storm’s advice in mind, many small business owners may consider what an exit would look like during this unusual time in history.
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