3 ways COVID has changed business valuations
| MAY 2021 Whatever your reason for requiring a business valuation, we can provide a valuations service that stands up to scrutiny. In this last year, COVID-19 has seen business owners find it even harder to establish and agree upon a fair market value, making it even more important to call upon the experience and judgement necessary to calculate the value of a business. |
| 1. It’s more difficult to arrive at a value – but not impossible. The usual valuation methodologies remain the valuation tools of choice, and so discounted cash flow analysis/market multiples assessment can still apply, even in the changed circumstances resulting from the pandemic. Our approach to the information that flows into a valuation (incorporating cash flow scenarios representing a range of future potential outcomes for example, amongst other things) ensures we establish a reliable and fair valuation. 2. It’s more important than ever to look closely at both the business and the industry. The state of the economy at the time of a valuation cannot be ignored, and when this is volatile, wider factors should be taken into account in order to ensure accuracy, so knowledge of the industry in which a business operates is now just as important as information on the business itself. It is now critical that nothing is missed when valuing a business, and that adjustments are made in accordance with all current valuation factors. 3. There is more reliance than usual on up-to-date information. For example, management accounts provide a more realistic idea of the current trading position than Statutory Accounts – the ‘go-to’ starting point for business valuations usually. These are historical, and therefore an updated budget and/or forecast figure has become more essential to show how a business has fared during lockdown. |
| The average value of UK businesses is still on the rise, so whatever the stage of growth of your/your client’s business, we can help. Talk to our service lead Chris Neasham on 01642 606003 or chris.neasham@daviestracey.co.uk to start the ball rolling. |