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Most business owners, large and small, already know the impact COVID-19 has had on operations, logistics, and revenue. For some, there has been an increase in opportunity for growth while others have had to pivot just to stay afloat. For those business owners pondering their 2021 exit, borrowing or merger strategies, the real question may be how has COVID impacted my business valuation?

What Is A Business Valuation

A business valuation determines the overall value of a company. A professional evaluation assesses a company’s financial performance, its assets and liabilities, and other proprietary factors that could influence the business’s worth.

When Do Businesses Need A Valuation?

Here are a few examples of times when business valuations are necessary:

  • Reporting – If you have outside investors or multiple owners, an annual valuation may be required.
  • Lender Requirements – If you’ve borrowed money, a bank or other lender may require a business valuation though this can often be satisfied with audited financial statements in place of an appraisal.
  • Bonusing Ownership to Employees – A valuation may be needed if you intend to bonus ownership of the company to certain employees. The valuation serves as an estimate of the value of the interest being set forth as a bonus and determines any tax impacts.
  • Divorce – Business owners facing divorce often need business valuations for negotiations or to be incorporated into any legal proceedings.
  • Selling Your Business – If you plan to sell your company, it is crucial to understand what the maximum value of your business is before listing it. This allows you to know the appropriate asking price for one of your most important assets – your business.

How Has COVID Impacted Business Valuations?

The bottom line is that each valuation is individual, just as the impacts of the pandemic have been unique for each industry and business. Valuations are also largely assessing future economic benefits based on historical data. With the impact of COVID-19 on businesses plus any potential PPP loans, the appraiser will need to account for these factors during the assessment.
If this applies to you and you want a free opinion of value to know the true worth of your business, contact us today for a consultation.