How to Value Your Company After COVID – It May Not Be As Difficult As You Think
It is officially 2021, and what was quite possibly the most challenging year for your company is behind us. The effects of COVID-19 are still apparent as the pandemic continues to claim lives in high numbers every day. Effective vaccines are giving us hope for significant improvement in the 3rd and 4th quarters of 2021. What does this mean for you or your business? Inevitably, because many small businesses suffered and all of them had to get creative to survive, the way a business is valued looks a little different right now. If you are hoping to sell your business this year, consider these tips for attracting potential buyers in a COVID marketplace.
As business valuators prepare valuations in the coming days, weeks, and even months, they have to consider a few things – how COVID-19 affected the economy, which valuation methods to use, and your business’s cash usage rate (burn rate) and balance and whether or not 2020 will even be considered in the final value.
Key to Success? Creativity!
More than ever before, your valuation has less to do with your profit margins and more to do with your survival skills. During a pandemic that locked down society and the economy, businesses were forced to shut down. Forced and unforced shut-downs and declines in revenue were products of consumer fears of exposure if businesses did not enforce masks and social distancing. The immediate dramatic effect of profits for some business sectors was a harsh reality. The businesses that were able to get creative, the ones able to reach their consumers safely, are the ones who will thrive. When it comes time to value your business and show potential buyers what you are worth, outlining your keys to survival will prove to be as valuable as your profits were in 2019 especially if your revenues and profits return to pre-Covid levels
Month-to-Month Financials
Time is everything. In the past, business owners broke down profits into quarters – that is pretty standard. Today, it can look a little different. Providing potential buyers with month-to-month financials can show the growth you have seen during and even after some of the lockdowns. Has your business grown or stabilized since the initial dip in sales in the first quarter of 2020? What is the game plan for continuity through the first two quarters of 2021? The answers to these questions are undeniably valuable and everyone understands that the standard formula for establishing the value of your company is not going to work in the current climate.
Competitive Edge
How are you doing relative to your competition? Have businesses near you shut down? Were other businesses in your industry able to stay afloat? What did you do to differentiate your company from the competition in the last ten or eleven months, and your plans for the next 6 to 8 months? Competition plays a major role in the value of your business. Needless to say, if your business is stronger than the competition, you are doing great. The ability to show that your business was able to survive, and even thrive, will make your business that much more valuable.
If you would like to see what your business is worth during or after the Covid-19 crisis, contact your local Transworld Business Advisors team for a broker opinion of business value. Our local experts are familiar with the local economy and market for every industry – they will have the answers to all of your questions regarding how to determine the current value of your business.
Call Michael Shea 321-287-0349 for a private consult on valuing your business now and tomorrow.