February 24, 2021

How to Value My Business During COVID-19

By Pedro Rincon, CPA, CVA

The extent the economic impact the coronavirus has made can be evidenced by just looking outside and talking to those close to us.

Families are facing both emotional and economic hardships, businesses are closing (either temporarily or permanently), and laid-off workers are seeking employment. No matter who you are, we are all feeling the effects of this pandemic.

In particular, business owners are being presented with many tough decisions during this time –balancing the needs of their employees, customers and themselves. For most business owners, your business comprises a significant portion of your accumulated wealth, begging the question, “How will the current state of the economy and its aftereffects impact the value of my business?

This is a difficult question to answer because of the company-specific variables involved and the uncertainties surrounding the pandemic.

In assessing the value of your business, it is important to consider the following questions:

  1. To what extent has the coronavirus impacted my business’s sales and profits?
  2. Are the impacts on my business going to be temporary or permanent?
  3. How long will it take for my business to recover?
  4. Will business return to pre-pandemic levels, or will there be a “new normal?”
  5. What impact does the coronavirus have on my customer base?
  6. How is the competitive environment of my business changing during this pandemic?
  7. How can I best position my business to be successful following this pandemic?

Keep in mind that when valuing any business, it is largely measuring the future economic benefit to an investor. How your business has performed historically is insignificant if it is not indicative of the future. For this reason, the value impact of the coronavirus will be different for every business and will heavily rely upon the answers to the questions listed above.

While the pandemic has challenged many aspects of our daily lives, it does present an opportunity for those wishing to gift their business or for those who may be managing the estate of someone who recently passed away. By gifting all or a portion of your business today or choosing an alternative date for an estate tax filing, you may be able to reduce the tax liability due to lower valuation levels caused by the coronavirus pandemic.

Pedro Rincon is a certified public accountant and certified valuation analyst with Osborne Rincon, CPAs. He can be reached at (760)777-9805 or princon@osbornerincon.com.  Osborne Rincon is one of the oldest and most respected full-service accounting firms in the Coachella Valley. To learn more, go to www.OsborneRincon.com.

 

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