Impact of COVID 19 on Business Valuations

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COVID-19 has impacted almost every part of life from how we work to how we socialize. It has also had a devastating impact on the economy. If you are a business owner, the natural question is “how has COVID-19 impacted the value of my business?” There are a few things business owners and end users of valuations should keep in mind when thinking about COVID-19 and how it relates to the value of a business.

Timing
Valuation standards dictate a valuation analyst should consider the events and circumstances at the time of the valuation. The general public became aware of COVID-19 in the United State during late February 2020. This view is supported by a significant decline in the U.S. stock market at that time due to fears of virus and its impact on the economy. For a valuation done prior to late February 2020, COVID-19 would not be germane because it was not “known or knowable.” Dissimilarly, for valuations taking place after that timeframe, the virus would be relevant, and how it has impacted the business and will impacted it in the future should be considered.

Is it Relevant to Your Business?
COVID-19 has produced contrasting economic outcomes. Some businesses in particular industries are struggling to survive, while others are having their best year ever. A valuation analyst will need to take this into consideration when determining the rate of growth for the specific company being analyzed. Although the broader economy may be down and unemployment may be up, these factors are not an indication of how every business is performing and will perform.

When reviewing a valuation report a business owner or end user of a business valuation should consider the timing of the valuation and how COVID-19 has impacted the business.

Should you have questions regarding the possible impact of COVID-19 on the value of your business, please contact, Chuck Fenske, CVA, Vice President of Consulting with Pease, CPAs, at cfenske@peasecpa.com. I would be happy to discuss the business valuation services Pease, CPAs can offer your business during these unprecedented times.

 

 

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