How does COVID-19 impact business valuations?

COVID-19 has affected everything. Before March 2020, we used to wake up, get dressed and drop the kids off at school on the way to work without much thought about anything else. We would open up our stores, turn on the lights, and greet customers with a smile and a wave. Now that all looks very different. Our children are taking virtual classes, our businesses were shut down for some time, and we are now more concerned with restocking hand sanitizer and enforcing mandated social distancing and mask-wearing than greeting with a smile.

It goes without saying that COVID-19 has completely changed most things. To stay afloat, business owners in every industry had to get creative fast. With an inability to leave homes or reducing their exposure to other people, customers prefer having items delivered or having the option for curbside pick-up. For many businesses, those options were foreign concepts a mere 10 months ago before coronavirus. The same goes for business valuations – there is no doubt how one values their business has completely shifted after 2020.

So, how does COVID-19 impact business valuations? To put it simply, determining the value of a business now has much less to do with the past, and much more to do with the future. Investors and prospective buyers understand profit margins are going to be lower in 2020 than in previous years. The interest now is in how the business survived COVID-19. What did you change to help the business stay afloat? How has this helped your profits in the last 4-6 months? And, most of all, what is your plan to continue to grow in the next 4-6 months? The answers to these questions will help potential buyers see the value in your business.

If you have questions about determining your business’s value as a result of COVID-19, do not hesitate to contact your local business experts at Transworld Business Advisors.