ValuAdder Business Valuation Blog

Business valuation tips, updates and advice. Pick up a few suggestions on how to value a business. Feel free to browse the contents or share your thoughts by leaving a comment.

When all hell breaks loose, you may wonder: how does it affect your business valuation? Apart from broken windows and missing merchandize spirited off by those who thrive on turmoil, what do social upheavals do to business value?

Good question. Let’s take a look at the fundamentals. No matter what causes the stir in the market place, the net effect is a disruption of doing business as usual. When business people cannot see clearly into the future, it does not bode well for business value.

Why so? In financial terms – business risk. As the prospects of running your company grow more cloudy, it gets harder to forecast your earnings. Making sound business investments that help the company grow and achieve its goals gets more difficult.

Established customers that rewarded your business with loyalty suddenly may find it hard to do business on the usual terms. Think of access to a neighborhood retail business in an area littered with debris that feels like a personal challenge to negotiate. Many customers may look elsewhere to fill their needs.

Employees who were the lifeblood of the company could back pedal and choose a safer haven in times of trouble. As a business owner, you can hardly blame people for looking to their personal safety first.

Suppliers you always relied on suddenly face headwinds that lead to delivery disruptions and shortages. Second sourcing of your critical supplies is always a good idea, especially when things get dicey. Have a plan B, if possible.

How to mitigate all these bumps in the road? Alternative ways of reaching the customers never hurt. If they cannot make it to the store, doing online business or curbside service might be the right thing. Show you care and your customers will repay with gratitude and continued loyalty. They will learn that you understand their pain and have their back when times are tough.

You don’t have to go broke to throw a lifeline to struggling customers. Offering payment terms to those strapped for cash may be a way to keep the revenues from tanking while helping your customers stretch their dollar.

This is the time to test the strength of your vendor relations. Are they willing to share the pain by offering more generous terms? If not, you know it is probably time to look for more viable suppliers going forward.

Watch your competitors for signs of aggressive cost cutting or abrupt market exit. Downturns have this predictable effect on businesses – many wind up as roadkill. Those that survive may find the market a totally different place. As the saying goes, if it does not kill you, it will probably make you stronger.

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