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Annapolis Business Owners, Are We Learning the Right Lessons From COVID?

| September 18, 2021, 01:00 PM

Covid Lessons

Dear Annapolis Business Owners – a quick question for you.

I know we have had a difficult few years. From pivoting from onsite work to virtual, to difficulties in hiring, constantly changing recommendations from the CDC, and requiring government loans to stay afloat – it has been a challenge. But my question to you is this – as we begin looking back on this experience, are we learning the right lessons?

As a business broker, my job is to help business owners maximize the value of their businesses. So, I get to see how owners and business leaders are handling the pandemic and the “lessons being learned.” But, I am not sure we are always learning the right lessons.

While admittedly it can be difficult to see the “big picture” when you are so focused on just keeping your head above water. Before you make any decisions, you need to first ask whether the challenges you are experiencing are “cyclical” or “structural.”

If they are structural, then you have an issue. New York taxi cabs suddenly had a structural issue once Uber burst onto the scenes. Blockbuster had a structural issue when Netflix began streaming Michael Scott and The Office into our homes.

However, if they are cyclical, your circumstances are less dire. While you may need to look for short-term help or adopt some changes to get through the near term, your business is still buoyant. You are not the Titanic post-iceberg. You are charter fishing on 15-foot swells.  Sure, it is more choppy than you’d like, you are not catching as much as you would like, and some of your mates may have trouble keeping their lunch down – but you’re still above water and the seas will eventually calm down.

Liquified Creative Annapolis

So, what are some lessons that I am seeing business owners “learn” that ARE wrong? Let us examine a few.

Restaurants are Rebounding, but With Renewed Focus on the Outdoors

I recently listed a new restaurant for sale in Prince Georges County. It is a nice little fast-casual restaurant and since the posting has gone live, I have had multiple callers asking for more information on this space. What is interesting is that they all seem to be looking for outdoor seating.

And while I love what Annapolis is doing with the Dining Under the Stars, not everyone needs outdoor seating. Remember, COVID is a once in a Century pandemic. And while yes it is still lingering, you should not expect to see another virus similar to COVID for another hundred years.

Yes, outdoor seating has been incredibly beneficial for restaurateurs during COVID, but do you really want to commit to the additional costs, upkeep, staffing, and all the hassles that come with outdoor seating – to deal with a pandemic that none of us are likely to see in our lifetimes again?

Move to Fully Remote Work Life

All hail our friends in Big Tech! Because of tools provided by Microsoft, Slack, Google, Amazon, and others, businesses were able to pivot from in-person to virtual work and still be productive. Tasks were still accomplished. Customers supported. Employment, while it dipped, did not bottom out.

Remote work allowed businesses to continue to support their clients (and staff) throughout the pandemic. However, the question now is, should everyone remain remote?

The answer to this question likely is not an all or nothing. Many CEOs of the fortune 500 are talking about getting people back in the office because they realize the impact on culture working from home has had. But now that we know that people can also be productive while working remotely, why take away that flexibility?

What we should be doing, is reconsidering your office space needs. Companies with 50 employees may now only need enough space for 35. And if that is the case, then why not downsize and take advantage of that savings?

I would urge everyone to look into flexible office space, such as the Regus locations we have in the Annapolis Towne Centre or 1997 Annapolis Exchange Parkway. If Regus is right for your business, there is also lots of good commercial real estate space available. I would also urge you to look at some of the great retail spaces available around town through Murphy Commercial Real Estate or Douglas Commercial among others.

Hold Off on the Sale

Again, I am a business broker. My typical interaction with a business owner is someone that is either looking to sell or scale their business. Many people that I talk to about selling their business are telling me that they would love to sell now – after all, it has been a hectic few years – but they want to hold off on selling for the time being.

When I ask “why?”,  they say that they want to get their revenues back up to pre-pandemic levels. Which I understand. I would not want to spend decades growing a business only to sell it at a discount either. However, that is not what we are seeing in the market. There are a couple of factors that are working in the favor of business owners selling right now.

  • One, the inventory of businesses for sale is 40% [or more] below pre-pandemic levels. Simply put, more businesses went out of business last year than we typically see, and now there is a lull in supply.
  • Second, buyers are still wanting to buy into profitable businesses. The stock market is still high. People still have their life savings. And now that they are being faced with the realization that they will need to return to the office, and that commute and those co-workers, buyers are willing to purchases businesses at pre-pandemic levels if we are able to see current year financials trending towards those levels.

So we have supply and demand working in opposite directions here, that favor owners. Therefore, we are seeing buyers willing to accept valuations at 2019 levels assuming that there is at least some evidence showing revenues tracking toward that timeframe.

Times Are Changing

In closing, we are clearly not operating in the same environment. But owners need to be careful to make sure that we are learning the right lessons from the pandemic.

If anyone has questions about any of the above or would like to discuss more trends that I am seeing in the local market, please reach out. The easiest way to connect with me is through email, at[email protected].

Category: Businesses, LIFE IN THE AREA, Local News, NEWS, Post To FB

About the Author - Steve Palmer

Steve Palmer is the Principal Business Broker with Transworld Business Advisors of Annapolis, and currently lives with his wife, Erin, and daughter Isla Mae, in Harwood, MD. Transworld is the largest business brokerage franchise in the world and has conducted over 10,000 business sale transactions across dozens of industry verticals since its founding in 1979. If you are, or have ever considered, selling or buying a business, please reach out to Steve by email at [email protected] or by call or text at (410) 842-6063.

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