For years, decades even, businesses failed to heed warnings about the looming pandemic. Then it hit, and many companies were left shocked, stunned, and floundering. Others, though, quickly pivoted to the next big thing—and often saw a big payoff for their efforts. Flexibility is key for thriving in business, no matter what’s going on in the wider economy. At times of crisis, it makes the difference between success and catastrophe. The world of M&A rewards businesses with consistent growth and a plan for crisis, whether it’s business as usual or the midst of a worldwide pandemic. M&A buyers are inherently risk-averse, and the market punishes unprepared businesses. Here is what business owners need to know to prepare for the next COVID-style crisis:
Not if, When
The question of whether another COVID-style crisis will hit the business world is not whether it will happen, but when. Crisis is an inevitable component of the economy, whether it’s a looming recession or a black swan event. Businesses must integrate preparedness and flexibility into their model because challenges are always right around the corner. Companies that are needlessly wed to tradition are bound to suffer from this predilection.
Recurring income builds incredible consistency into your earnings. Subscription-based models offer a buffer against tough times, so business owners should assess how they might incorporate these into their offerings—whether it’s subscribing to services, offering subscriber content, subscription boxes, or membership-based benefit plans, there’s almost certainly a way to generate more income with a recurring model.
Flexible Earnings Models
A business must first identify its core source of profits, whether it’s sales, services, or something else altogether. Then, owners should assess how to build flexibility into this model. For example, many companies switched to online services during the pandemic. Others capitalized on the pandemic by offering delivery and other services that kept people safely quarantined. Businesses can’t predict the specific needs of the next economic crisis. But they can build more flexibility into their way of doing business, so that it’s easy to make a big switch. Owners must avoid excessive attachment to specific business locations, partners, technologies, or earnings models.
A Top-Notch Team
In mergers and acquisitions, and at every other stage of the business life cycle, owner dependence can be the death knell for a company’s success. This is because a company that is excessively dependent on its owner carries more risk. It has less flexibility, and a less competent team. Owners who feel anxious about being away from their company ultimately undermine its success and its team; instead, they must offer top-notch compensation to hire top talent, then offer the training that talent needs to successfully run the company. When crisis strikes, a creative, thoughtful team will generate more ideas, and therefore more options for mitigating loss of revenue/profits. And when it’s time to sell, the team will be there to shepherd the business through its next great act. Owners must be prepared to hire only the best, and prioritize recruitment, training, and retention.
COVID fundamentally shifted much about the M&A world, but the value of preparation, expert insight, and a strong management team remains forever consistent. Owners preparing for M&A should consider hiring an expert advisory team early in the process to optimize the value of the transaction.