Thinking back to March, many of us probably believed we’d be back to normal by this point.
The early months of COVID-19 were fraught with uncertainty and left industry professionals confused about how to keep their businesses running. Although there’s still plenty of uncertainty surrounding the future, most of us have come to terms with the “new normal” that we’ll experience until there is a vaccine available.
While we’re scanning headlines and waiting for updates, it can feel pretty jarring: You’re physically stuck inside, but your brain is working in overdrive. Every week that goes by with no updates may leave you wondering about the right move for your business.
Of course, most business owners have had to make plenty of hard decisions already. There have been countless difficult conversations, sleepless nights, and second guesses. Some have been forced to furlough, layoff, or even terminate their team members. Many companies are operating at 20 percent capacity or below.
There’s no way to sugarcoat the impact COVID-19 has had on the industry, but there is a bit of solace in the fact that we’re all in this together. Regardless of what you are going through, you’re not alone in this battle.
We’ve all asked ourselves that one difficult question: Is it time to call it quits? The answer to this question isn’t any simpler—it depends on numerous factors, including the impact on your clients and employees. In this article, I’m getting candid about your options going forward and how to make the best decision for you, your business, and your stakeholders. Move forward, close, or sell: What are my options?
Maintaining your business
This seems like the easiest option, but it can also be one of the most challenging choices. If you are moving forward, recognize that the catering industry will look different—even after the virus threat subsides. Social distancing is nearly a habit at this point and, post-pandemic, people will still be mindful of the boundaries they’ve established this year.
For live events, of course, this is tricky. Mingling is the opposite of social distancing and, until there is a vaccine, we need to continue encouraging physical distancing and requiring masks when guests are away from their tables. Clients should also be encouraged to limit their guest counts, even if there isn’t a state or local mandate in place.
This plays into your sales approach heavily, as sales isn’t just about touting your accolades and creating a sample menu. Now, prospects will be looking for your commitment to health guidelines to ensure the safety of their guests.
It’s clear the future of the industry is very different, but who is going to make it to the other side? The truth is that there is certainly going to be an economic downturn and, in my opinion, the leanest companies will be the ones to survive. These are the businesses that have sufficiently diverse revenue streams or have a single revenue stream that is insulated from the downturn. They are also the best-managed companies, in that they have a strong leadership team in place.
Closing your business
This is a difficult decision to make, but one made even more challenging if a business owner doesn’t take the proper steps. Ideally, you want to create and follow a closing plan that keeps your reputation intact and protects your assets as much as possible.
First, you need to determine whether your company has liquidation value, which depends on how your business is structured. Contracts are valuable if also transferable, so determine the cost attached to each. You can also consider liquidating client lists and operational documentation (i.e., the tricks of the trade), as well as certain types of hard equipment (although this market might saturate quickly as more businesses fold).
When it comes to accounts payable with vendors, it might require negotiation. If you’re staying in business, you can simply ask for an extension; however, if you close, you do owe the balances in your and your businesses’ name. If you don’t have the resources to pay off your debt, it could be worth considering the bankruptcy route.
Now, for the hardest part: letting go of your employees. It’s a hard situation for everyone, so do everything possible to treat your team with dignity as you approach the end date. Be honest about what you can do for them and do what you can to help them find positions elsewhere. Call your competitors. Reach out to your network. Your team had your back, so it’s time to return the favor.
Selling your business
Selling a catering company to an unrelated third party can take months or even years. Smaller companies will be less complex to acquire, so if you earn less than $1 million annually, I’ve heard of deals happening in a matter of a couple months.
One major consideration is whether you have ownership over the property your business uses. If you do, you can always try to retain the property as a landlord. This is the best option (especially if your purchasers are willing tenants), but some buyers will want to own the property along with the business. How you navigate this greatly depends on the purchaser’s requests and the overall logistics of the deal.
Prior to COVID-19, the market for catering companies was quite active and was on a strong upward trend. Although it has hit the pandemic speed bump, there are still deals moving forward so it’s certainly not impossible.
If you want to sell, these are the factors buyers will be looking for:
- Market position
- Brand equity
- A history of quality management
- Low turnover rate • Existing infrastructure
- Profitability and room for growth
- Well-documented historical sales and financial information
- Existing contracts
- Positive press coverage, reviews, and awards
If selling is the right option for you, be sure to work with quality professional advisors to help streamline the process. Clean up your financial reporting to make it easy to understand and ensure compliance with industry standards. Then, have your company valued—most caterers have seen a 10 percent profit in the past several years, but your consultant will have the best grasp of your situation.
So, move forward, close, or sell? It really depends on your current standing and your tolerance for risk. Regardless of which you choose (or whether you’re still pondering), hiring a consultant to see you through this process is invaluable. They’ll help you make smart business decisions and ensure that you do so in a way that ensures you are legally and financially sound. Remember: You are not alone and you don’t have to do it by yourself.