Understanding Business Valuation

This is a trying time for business owners in many industries, and to add insult to injury, many of them have been unable to obtain access to the government assistance that was promised. This has left countless business owners wondering if they will ever be able to come back, and unfortunately, some have decided to close permanently.

Just how widespread is the problem? According to a National Small Business Association (NSBA) survey, 77% of business owners surveyed said they were “very worried” about the economic impact of the coronavirus pandemic. 49% said that customer demand was down, and 54% believe that our economy is headed into a recession within the next 12 months.

This survey was taken back in March at the beginning of the lockdowns, and since then, we have seen 30 million Americans apply for unemployment. So, it is probably safe to assume that the economy has already gone into a recession. The question now is how deep the recession will be and how quickly we will be able to climb out of it.

As grim as all of this sounds, there is some good news. For businesses that are able to stay afloat, there is a good chance that they can bounce back after they open up again. Maybe not at first as consumers will be apprehensive initially, but over time, those who survive are likely to be well supported after they become fully operational.

In the meantime, business owners will need to be creative and do whatever they can to survive. Here are some things owners can do to maintain their financial footing during these turbulent times:

Find Ways to Remain Operational: Americans are resilient, and our businesses have always shown the ability to adapt to adverse circumstances. That is exactly what is happening while the COVID-19 pandemic is ongoing. For example, many restaurants that were previously sit down only have quickly transitioned into offering curbside pickup and delivery. Retailers who had little to no digital presence have quickly established themselves online. And many offices that had to close down have continued operating by having their employees work out of their homes. If there is a way to at least do some business during this time, it will put you in a much better position to recover when everything reopens.

Explore all Funding Options: Trying to get the new SBA Paycheck Protection Program (PPP) loan has been a very frustrating experience for many small businesses. The application process is confusing, and the program has already run out of money once before Congress passed additional funding for it. The Economic Injury Disaster Loan (EIDL) is another program with good intentions that has been difficult to access. Even if you are unable to get help from these programs, however, there are some other options out there that you may be able to benefit from.

For example, Facebook has set up a small business grants program that is aimed at helping up to 30,000 small businesses in over 30 countries where the social media company operates. To qualify, you need to have been in business for at least a year, have between two and 50 employees, have experienced disruptions because of COVID-19, and be in or near a location where Facebook operates (which includes all of the United States).

You may also want to look at other commercial lending options that are out there. For example, the SBA has bridge loans that some business owners can qualify for over and above what they could receive through a PPP or EIDL loan. Banks and other commercial lenders are also still lending, so it never hurts to talk with your financial institution about what options you might have.

Renegotiate Contracts and Debts: Now is the time to look at contracts you have for your location, vendors, and also debts you are carrying to try and negotiate more favorable terms. Everyone is aware of the situation, and we are all in it together. And those you do business with certainly do not want to see you go under. Speak with them and you will most likely find a great willingness to be flexible during this difficult time.

Cut Out the Fat: Now is the time to look at what you can do without, and everything should be on the table. Be careful not to cut areas that bring you a positive ROI, such as effective marketing campaigns. But that said, all nonessential expenses should be looked at and cut if you can get by without them.

Stay Connected with Your Local Community: Your business was built to serve your community, and this is a time when many within local communities are in great need. Though you may be struggling, there may still be ways for you to serve others. For example, you could have meals sent to frontline workers, or delivered to the elderly or shut-ins who are nervous about leaving their homes during this time. Also be sure to post updates about your business on your Facebook page and in neighborhood Facebook groups. The more you stay connected with your community, the more they will support you both now (if they are able to) and when everything opens up again.

Look at Last Resort Options: Every situation is different, and every small business means something different to each owner. For many, their business is their only source of income, and losing it means losing their livelihood. With so much at stake, it may be worth considering options that were previously unthinkable.

For example, you could look at taking out a home equity loan to provide the capital you need, or you could go to a family member or friend for a loan and/or to find out if they are willing to invest in your business. Crowdfunding is another way to get you through; for example, you could set up a Go Fund Me page and invite those in your community to contribute so you will have the capital necessary to get through your temporary closure.

Prepare for a Stronger Future: After we get through the coronavirus pandemic, the businesses that survive will come out stronger on the other side. That said, there are sure to be changes in the marketplace, and some owners will decide that it is time to sell their business and move on. For those looking to sell (or for that matter, those looking to buy a new business when all of this is over), the best place to start is to speak with a reputable business intermediary.

Business intermediaries, also known as business brokers, have extensive experience working closely with buyers and sellers, and they have an in-depth understanding of the process. Partnering with a broker can save you untold amounts of time and headache and position you for a smoother and more successful transaction.

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