As the pandemic swept the world, we were bracing ourselves for the very worst. Would anyone really want to buy or sell a business during the COVID-19 crisis? Recessions come and go but this was looking like an economic tsunami.
In the immediate aftermath of the lockdown in March, traffic to BusinessesForSale.com halved from 1.3m visitors to 700,000 in a matter of days. But the fact that there were still 1000s of business buyers searching the website looking for a business was not just a relief for us but also quite fascinating.
A massive online marketplace to buy from during COVID-19
What was going on? The answer lay in the fact that BusinessesForSale.com was a mirror of the real economy.
While businesses that were instantly shut down – such as pubs, restaurants and hotels – which saw interest suddenly fall off a cliff edge – we saw a sudden spike in enquiries to tech and e-commerce businesses as well as convenience stores, pet shops and petrol stations.
What we discovered in the next few weeks and months was a revelation. Buyers had cash and they were moving in to make quick gains – and they still are.
So, to get a better idea of these trends we started reaching out to the buyer market with surveys. We wanted to know how much money business buyers had as cash to invest, what sort of businesses they were looking to buy during COVID-19 and why.
In the UK, we discovered that over 54 per cent of the business buyers we surveyed had more than £50,000 in cash to use as a deposit and with 80 per cent of them believing that prices would come down as a result of COVID-19. Over 38 per cent of them intended to finance the entire purchase of a business using their cash reserves only.
Buyers with cash to invest
What we were seeing was the sudden emergence of an aggressive buyer’s market. It was evident in specific sectors such as campsites and campgrounds or tech and e-commerce opportunities.
As CEO Andrew Markou said: “Because of the uncertainty of Brexit in the last three years, people have generally held onto cash and this pandemic has accelerated that. But with interest rates at such historic lows, the cash in the bank is seen by entrepreneurs and those looking to start or buy a business as a liability rather than an asset, so it makes sense to put that cash into a business, especially if sellers are willing to reduce their asking prices for a faster sale in this climate.”
However, our surveys also revealed a healthy appetite for banks to get involved.
One person surveyed was Ben Harding, 34, from Devon, who was looking at campsites for sale in the £500,000 to £850,000 range. By his own admission he was in a position to put down a ‘healthy deposit’ but banks were still very keen to lend.
“I have spoken with two commercial brokers who have said we are in a strong position to buy. It was suggested we could borrow up to £1.3m,” said Ben.
COVID-19 business impact report
Another one of those business buyers surveyed, Muhammad Amjid Qazi, an experienced entrepreneur from Canada, highlighted what every buyer was thinking across the world:
“Any business plan template should clearly highlight the COVID-19 impact on revenue forecast wherever the revenue stream is in order to gain trust and confidence. The goodwill of a business will have changed dramatically as a result of the crisis and banks will certainly be critical of it,” he said.
When it comes to constructing this business plan, you should:
- Provide details of the history of the business and its performance before COVID-19
- Explain the strategies that the business has put in place in order to deal with the crisis
- Look forward and talk about possible future strategies for growth in a post-COVID-19 world
- Establish whether the business’s aim been affected by COVID-19. If it hasn’t, point this out
- Define the opportunities that can be created from a market after the pandemic
Be as honest as possible but you should also think carefully about and include all of the ways that your business will be able to develop and grow in the future. Creating a picture of the future for possible investors is how you will be able to close the deal.
As we start to gently and ever so carefully come out of lockdowns around the world, buyer traffic is returning to pre-COVID levels. However, it is still a buyer’s market and will probably continue to be so throughout the next 12 to 18 months.
Read here for more information on the business buying process.
Matthew Hernon is an account manager at Dynamis.