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Did COVID Kill Your Business, or Was It DOA?

“Revenue was stable, though our margins were always thin. We didn’t expect to make great money when we opened the store, but we loved what we were doing. That was before COVID, it killed our business.”

Beatrice (not her real name) was introduced to me through her accountant. 她让我做一个 valuation on her Nashville business, and tell her what I could do to help her sell it.  Once I saw the financials, I knew it was going to be a not-fun conversation.

Beatrice told me she opened her specialty shop in 2014. 它从来都不是那么有利可图, but she was able to pull out a few thousand dollars a month in compensation and pay her other bills on time. She said she had a stable customer base, some had even become her friends.

I could hear the pain in her voice. “The stay-at-home order in late March just killed us. I had about $120,000 in inventory orders I had to pay for, and the April rent was due. I had these expenses with no revenue. 几周前我们重新开业了, 但我还是损失了10美元,每月000, and that’s before I pay the monthly rent. So far, I’ve covered the expenses with money from my husband’s 401K, but we can’t continue that.”

I have always wondered how doctors live with the trauma of having to deliver bad news. While no one was going to die in this situation, the business was on life support, so I wanted to be respectful of the pain she was in. “Beatrice, I’ve seen several situations like yours in the past couple of weeks. You aren’t the only business owner dealing with this.”

Beatrice was hoping I could find a buyer who would pay her for the inventory and take over the lease. “I kind of expect I won’t make any money,” 她告诉我, “I just want somebody to take it from me.”

I don’t handle the sale of small retail businesses like this, I usually refer them out to a “Main Street” business broker. 但是在这种情况下, I felt that I might as well tell Beatrice the truth: her business is not sellable for any amount. Specialty retail runs thin margins on a good day, and those margins don’t provide the business owner the fuel to sustain any disruption in the business.

I went on to give Beatrice my view of her options, 或者我应该说, her option: liquidate and stop the losses. She’ll have to pay the remaining lease obligation, but by closing now she can eliminate the monthly $10,000年运营损失.

On the day I write this story, about 150,000 Americans have died from the effects of COVID-19. We’ll never know the number of businesses it has also killed. But all this gives rise to a lesson everyone needs to remember before they launch a thin-margin business. 中断时, 它有很多方式, a thin-margin business will likely not be able to sustain itself. 我的观点是, I don’t think COVID killed Beatrice’s business, it was on life support the day she opened. 

 

JIM CUMBEE is President of 田纳西河谷集团, Inc. a retainer-based business brokerage and transition mediation firm 在富兰克林,TN. Cumbee is an attorney and has an MBA from Harvard Business School. 吉姆是这本书的作者 韦德体育app官网 Run, A Pro’s Guide to Selling a Business. http://www.amazon.com/Home-Pros-Guide-Selling-Business/dp/1599329239 .  He has a wide range of corporate 和企业家ial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. 上述原则是正确的, 但是故事, names and fact patterns are changed to preserve the parties’ identities.

 

Use of this photo is approved by the CDC.

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田纳西河谷集团

吉姆Cumbee established 田纳西河谷集团 to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, 吉姆是一个买家, 卖方, 和企业家. His broad range of experience gives him unique insight into how business buyers and 卖方s can achieve their goals.

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