Weighing heavily on everyone’s mind is does COVID 19 impact company worth. If you’ve seen this coffee mug around, you know it’s a twist on a common business term used to measure profitability.
Earnings Before Interest Taxes, Depreciation, Amortization…. and Coronavirus.
It’s an attempt at a bit of humor to break the tension 2020 has brought us. Interestingly, in my conversations, it has sparked a more serious question.
At what point does COVID 19 impact company worth?
When the crisis first started, business valuation experts viewed it (COVID) as the same as a Florida hurricane. It’s a significant business disruption. But the impact of COVID 19 on company worth is temporary. Any blips in revenue were quickly explained away to buyers if they corresponded to the month the act of God occurred.
However, what defines temporary? Are there lasting effects to COVID 19’s impact on company worth?
As we approach the 9th month of the pandemic, it’s clear that even the most optimistic projections say business will not return to true normal levels until after the first of the year. With nearly a year lost, wouldn’t it make sense that it would affect business value? Especially in sectors that have not begun to bounce back, as in the case of gyms and high-end restaurants?
Surprisingly, as of now, the valuations I have seen are not discounting for the last 9 months. As of now, pre COVID numbers are being used for purposes of bank loans and other due diligence. But how long can this continue? How long will they use pre-COVID valuations to circumvent the COVID 19 impact on company worth?
So far, demand (buyers) has exceeded supply (sellers) by a wide margin.
This is part of the reason valuations have remained high and pricing consistent thereby minimizing the impact of COVID 19’s impact on company worth. Contributing to this market stability are sectors that have experienced a boom. Home services, landscaping, medical transportation, and gun dealers have been the clear winners. However, storm clouds have not cleared.
Nearly 1,000 people per day are moving to Florida. That has contributed to keeping sale prices for businesses at high levels.
I assess that we are now in the middle of a market correction of what some businesses are worth.
There has never before been a precedent of government-mandated business closures and restrictions. Eventually, the market will react to this. Business owners’ well-laid sale plans will be dashed just like it was in 2008.
As a company moves closer to 12 months’ worth of company performance data, banks and buyers will be forced to use this information to grant loan requests and make offers. It’s going to be a hard dose of reality. Business owners will realize their company is worth maybe half of what it was only a year earlier. This is a direct result of COVID 19’s impact on company worth.
The reality is, nobody knows what is next. Especially in a presidential election year. So the impact of COVID 19 on company worth is still to be determined.
What I do know is that business owners need to get an idea of their company’s worth through a broker’s opinion of value. So, if you want to know if COVID 19 impacts your company’s worth, we can help. We offer those at no charge. Owners can make intelligent decisions about choosing to sell now or to wait and spend more time in their business building value. I believe a major correction is coming to circumvent COVID 19’s impact on company worth. The lessons of the great recession will once again be taught. Back then, owners not selling before the housing crisis saw the value of their business plummet. It took a decade for them to return to pre-recession levels of worth. That was a hard pill to swallow for some. And if you were in ill health or approaching retirement, it came at the worst possible time.
Will it happen again? Only time will tell if COVID 19 will have a lasting impact on company worth.
About Bianca Evans
Bianca Evans is an experienced business broker based in Jacksonville, Florida. She is a top producer in her field. She has made over 160 transactions since 2006 which makes her among the most seasoned in the area. She is a Certified Business Intermediary (CBI), a Certified M&A Professional (CM & AP), a Board Certified Intermediary (BCI), and has her B.S. degree from the University of Florida.
Other notable accolades and achievements:
•The Million Dollar Plus Award 2008, through 2020
•Dealmaker Award top 3% in the state for completed deals 2018
-Most dollars sold in North Florida in 2018, 2019
•Sold an array of industries including manufacturing, wholesale/distribution, service, retail, restaurants, professional offices, and more.
•25 years of Sales Experience
She maintains her professional networks by participating in a variety of associations including the International Business Brokers Association (IBBA) and the Business Brokers of Florida (BBF).
One interesting fact about Bianca is that she used to be a business owner herself! She has been on both sides of the transaction when she purchased and later sold that same business. She finds that perspective invaluable when relating to her clients and balancing the many details and emotions.
She is licensed in Georgia and Florida and speaks fluent German.
To reach Bianca, email: [email protected] or visit her website https://www.myfloridabusinessbroker.com/