Sit-Down Interview With Business Broker Harry Sidhu

What are your thoughts on where business acquisition & sale market activity is heading over the next 3-6 months?

We are Main St. brokers in the San Francisco Bay Area. We specialize in gas stations, liquor/convenience stores, restaurant/bars, commercial real estate, and commercial/SBA financing.  

Obviously, we have seen a major drop in restaurant sales. We have also seen an uptick in interest in Convenience/Liquor stores & Gas Stations.  

We predict that full-service restaurants are going to continue to suffer but delivery/take-out only restaurants will continue and expand their offerings. California state has just issued re-opening guidelines for eateries. The number of customers will be restricted in dining establishments which will likely too hard for smaller restaurants to manage especially if they were already operating on thin margins.  Larger and franchise restaurants may fare OK if they are able to accommodate all the additional state-mandated adjustments.  

What do you see as the most significant SELF-IMPOSED threats out there that could hurt the market for business acquisition & sale and small business activity in general?

Fear coupled with uncertainty on how long this recession will last is keeping most investors from buying new businesses.

What do you see as the top three things the government needs to do to support main street business acquisition and sale opportunities for small business owners through the remainder of this year?

1. Another stimulus package for small businesses.

2. Extend paycheck protection, let business owners use the money for rent (the current PPP program only allows the use of funds towards rent not more than 25% of the total grant).  

3. SBA should waive loan fees of approximately 2.5% of the loan amount.

What do you see as the top three reasons to BUY a business in 2020?

1. Only businesses with verifiable books are going to sell.  

2. Opportunity to buy a business with positive cash flow at a reasonable price.  

3. Take advantage of 6 months worth of free SBA loan payments & historically low-interest rates on SBA 504.

What are some of the questions a business owner should ask when choosing an advisor to help buy a business or work on exit planning to help navigate through this challenging stretch?

Business owners should ask advisors the following questions:

• Are there buyers to buy a business?

• Are there verifiable, clean books and records?

• Is the business eligible for SBA financing (key to materialize a sale)?

How would you rate the current political environment related to small business growth, business acquisition & sales?

2/5

What are your thoughts on transaction terms for buyers & sellers in the current market?

Seller expectations are expected to be reasonable. Good businesses with clean records are eligible for SBA financing that is easily available (banks are eager to lend), hence I do not expect big price drops in the asking price but businesses with poor financials are going to face a much tougher time to sell. Call it Biz Opp Darwinism. 

There's a major problem in the hospitality industry. What will survive are take-out, deliveries, commercial kitchens, and the like which are going to be the main focus going forward until we have a vaccine or herd immunity. Landlords providing significant rent concessions will make a big difference considering the inflated costs of Bay Area rents pre-COVID-19.

Thoughts on business valuations in today's market?

Valuations are based on multiples. It's too early to say but if this current situation drags on through 2021-22, valuations will eventually be highly affected.  

We are pretty sure that appraisers for lenders won’t be comfortable basing valuations for hospitality businesses only on historical numbers and completely ignoring post-COVID-19 impacts to a business's financials.