Business appraisals can be difficult at the best of times. Unfortunately, as business brokers, we don’t have an equivalent to RP Data or any way to look at the pricing of sold businesses. Each business is very unique which also makes comparable sales difficult.
Usually, to appraise a business we review the last few years financials along with other critical items such as lease terms, included plant and equipment values, diversity of customer base and any contracts, supplier arrangements, number of employees and their key roles and other items such as IP, social media or anything else that might add value to the business.
Appraisals can be complex however COVID-19 has certainly thrown another spanner in the works. Historical trading performance has never been more important. Business Brokers now have to exclude the income from government stimulus and review older data to try to assess how the business is likely to trade after economic recovery. There has also been some impact on business values due to uncertainty, buyers are wary, so it’s never been more important for business brokers to be providing very realistic pricing to potential sellers. Some businesses have also thrived throughout COVID-19 however the review of increased revenue should also be carefully considered in relation to future sustainability.
It is important to take time to review all information extremely thoroughly for clients to ensure that the feedback given in relation to pricing is realistic and achievable.