Benchmark Business Group

COVID and Business Value

June 15, 2020

COVID and Business Value

Buyers' number one concern in buying a business is the reliability of future revenue. COVID-19 is akin to an earthquake sending unexpected seismic shock waves of revenue disruption. Depending on how your business industry lies geographically among the strata of business industries, you’ve either experienced minor ripples or huge disruptions to your revenue, while other businesses may be sitting in protected pockets of industry, or in locations that are relatively unaffected. Meanwhile, we’re all waiting to see how long the aftershocks will last, and how severe they will be.

The forecast; is uncertainty. No one knows for how long we will be living in trepidation of the next wave of COVID. It’s mid-year and most businesses can’t predict their 2020 revenues, let alone their future streams of profit. And make no mistake, most buyers purchase a business for its ability to reliably produce a profit. Buyers use the financial rear-view mirror to assess a business's ability to retain clients and produce profit in the future. The typical scenario is for a buyer to look at the past three years tax returns and financial records to predict the financial future.

And then came COVID.

How will COVID impact your business value? The answer, of course, is that it will be different for every business and different in every industry. And presently there are too many changing factors to know. However, what will remain the same is your last three years of profit – they paint a picture of your business. Ask yourself; is that the profit picture you want hanging on your wall when you go to sell? Put on your “Buyers Glasses” and take a critical look at how buyers will view the business you had at the end of 2019.

Ask yourself: Was my business…

  • operating efficiently and effectively?
  • able to get results without my presence?
  • cash flow sufficient enough to reinvest in growth initiatives?
  • getting a dominant market share of customers?

COVID has forced all of us to look at life and business differently. It has presented the perfect opportunity to redesign your business to have more value. There are eight drivers of business value to consider as you prepare your business for sale – you can influence each of them to design your business for maximum value, while you own it, and when you go to sell it.

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