With recent events, COVID-19 has had a dramatic impact on small businesses. This is true whether you are a small business owner looking to buy, grow, or sell a business. Below we discuss questions a business valuation analyst will ask to better understand what impact COVID-19 has had on your business. The valuation expert then uses this information to analyze and determine the value of the company. As a business appraiser in Utah, Peak Business Valuation asks similar questions to those below in every valuation engagement.

General Impact

  • What is the status of the business?

Is the business temporarily closed? Do you have limited hours? When did the shut-down occur and when is the business expected to reopen? Is the closure limited to region or statewide?

  • How have employees seen an impact?

Have you laid off any employees – particularly “key employees”? What costs will you incur to rehire, train, etc.? Do expect any voluntary employee turnover?

  • How will COVID-19 impact the business between now and the loan closing?
  • What impact has COVID-19 had on the business’ sales/revenue?

Government Regulations/Added Safety Measures

  • Are there current local or state government COVID-19 regulations in place? Are they limiting or impacting the business? If so, how?
  • Have you seen added expenses to the business because of COVID-19? Examples may include personal protective equipment. What is the estimated cost per month?
  • Would the company shut-down temporarily if an employee gets COVID-19? What backup plan does the business have to continue operations if the business shuts down?
  • Does the company foresee any financial impact to the business if the government implements another stay-at-home mandate?

Customer/Supplier Impact

  • What impact has COVID-19 had on acquiring new business? What about current customer retention?
  • Have you seen an increase in the acquisition of new customers or retention of current customers? What about a decrease?
  • Have you seen any loss of customers due to COVID-19?
  • What sector or industry does the company serve? Has this sector seen an impact by COVID-19? Current Impact? Future impact?
  • Do you have current customer contracts for your product/services? Have they continued throughout COVID-19?
  • Have there been any changes to customer/supplier payment terms due to COVID-19? How has this impacted your revenue, expenses, and working capital?
  • Have you seen any disruptions in your production or supply chain? If so, has this led to slow product shipment or order fulfilment? Are there any delays in servicing client orders?

Financial Impact:

  • What impact have you seen to net income and revenue due to COVID-19?
  • Have costs or other expenses seen an impact?
  • When do you expect the business to return to normal revenue/cash flow?
  • How many months can expenses be covered by the company’s current working capital?
  • What does a 12-month financial projection look like considering COVID-19? This includes hiring, training, reopening, recovery timeline, etc.
  • Does the company have or will receive a PPP loan or any other assistance through government lending? If so, how much? Will the new owners assume this debt?

Summary

There are many factors to consider when valuing a business during COVID-19. A valuation expert will seek to address each of these areas to analyze the impact COVID-19 has had on your business and will have in the future.

Peak Business Valuation, a leading business appraiser in Utah, helps small businesses understand the value of their company. Knowing the value of a company can help you prepare to sell a company, grow your company, or buy a company. We are always happy to answer questions you have. Please reach out via email or schedule your free consultation by clicking the link below.

 

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