What Is My Business Worth?

A recent conversation went a little something like this, “it’s our second largest customer, we’ve been on hold with them for the better part of 15 months.  They want us back starting in October, at near historic levels.  Other customers are making similar requests with little start up time.  In fact, our pipeline into next spring is fuller than it has been in several years.  I still need to get some control over our labor issues.  You can imagine that I’m back to wearing too many hats.  Is it too soon to start talking about our exit strategy again?”

It’s a fair and complicated inquiry to make in the middle of a global pandemic.  Simultaneously wondering if the end is in sight, while hoping it is not another false start.  Business leaders and executives across the country are asking when is it time to pick up their strategic goals, and with that in mind what is the business worth now?

Tracking business performance and your enterprise value can be complicated in the best of circumstances, but during a period of global uncertainty it can be near impossible.  At the start of any crisis the best laid strategies are often tossed to the side as the emergency itself takes focus—triage and crisis management become the new goals.  But as the initial months pass, and normal still seems far off, those set-aside-strategies quickly become stale.  When and how to pick back up can then become quite the dilemma.

Many of these strategic plans are tied directly to ownership goals.  As varied as the businesses themselves, they represent anything from reaching a particular revenue level, growing a new service line or geography, acquisitions and green-fielding, or planning for a retirement or executive exit.  While periods of long-term uncertainty can see these plans diminish in scope, they don’t have to disappear entirely.  Additionally, keeping to these goals even to varying degree, requires a company’s enterprise value remain in focus.  At these times, when crises seem to dominate, the underlying principles that determine the enterprise value don’t truly change.  Rather, the market simply approaches some of those principles differently.  For example:

• Financial reporting is often left to our CFOs, CPAs, and accounting teams.  But especially now, the executive needs to monitor them closely, and make certain Covid effects are separated out and tracked.  Buyers today want to know what is “Covid inflation” and what has Covid done to bottom-line performance.
• Customers and their activity remain critical to the business’ value.  In the midst of Covid, has customer communication been regularly maintained?  Are current performance levels permanent?  How does customer activity today compare to pre-pandemic and potential post-pandemic levels?
• Which direction are operating efficiencies trending?  Have new processes, technologies, or services been introduced over the last 18 months?  These could include remote work environments, new communication tools, or a product that would bring increased enterprise value post-pandemic.  Tracking these successes is critical to the sustainability they could bring.

These points add to the traditional value indicators that help a company find its footing when coming out of a period of crisis. Understanding this market and what buyers strategically value will open up a path to success and provide the company strength for both short- and long-term decision making.