As I speak to owners about selling their business this year, after sitting out from doing so during the pandemic, I tell them that based on how the business performed during the pandemic, they will have to confront two questions from buyers.

1. Your business decreased in 2020. If you think it was due to the pandemic, when do think they will return to 2019 levels?

2. Your business grew in 2020. If you think it was due to the pandemic, then will this be a  permanent shift in demand for your product or service or is it transitory and revenues will return to 2019 levels?

Buyers will ask these questions because it is the only way they can assess value.  In either case, they will probably wish to defer some of the transaction price until those questions are answered by the results.

So, if revenues declined in 2020 but you think the business should be valued as if it were still 2019, then you need to clearly show this is the case when you bring it to market.   If you show month to month progress over the balance of this year which then continues into 2022, then you can ask and probably get the 2019 valuation.  If not, then you either wait to come to market or expect to base some of the purchase price on an earnout where it is paid upon achieving certain revenue targets.

If revenues increased in 2020 and you think value should be based on this level of business, then you’ll also need to show results.  You could certainly expect a 2019 price, but you will have to build an equally compelling case that revenues are continuing to run at 2020 levels through the end of the year and into 2022.  Otherwise, wait to come to market until this is a proved forecast or defer some of the purchase price.  This is two sides of the same coin.

If revenues weren’t affected, then you can proceed to market as normal, and you will receive a fair valuation with fair terms.  The market is actually quite good so I wouldn’t delay because of any of the lingering effects the pandemic may be having on the rest of the economy.   M&A activity is returning to 2019 levels, so it is as good a time as any to sell a good business.