Doing so can help you build your company value
For some business owners and CEO’s, Corona-geddon impacted 2020 in a painful way and yet for others it enabled their business. Regardless which category you find yourself in, think about how you want to finish the year in terms of how it will impact multi-year financial performance trending.
I always play the movie forward on business matters, especially those that can impact my future company value, or company worth. As you play your business movie forward with potential thoughts of wanting to sell your company in the next few years, 2020 will be a critical part of the historical assessment a potential acquirer will conduct as they place a valuation on your business. Think about the performance trend you will want to show and how 2020 factors into that. For instance, if you want to consider selling in 2022 or 2023, a potential acquirer will review the historical revenue and profit trends of your business and 2020 will be included. You therefore will want to show 2020 as a base year with upward performance trending for 2021 and 2022. Start thinking now about how to help ensure that 2021 will be stronger than 2020. For some, this may mean piling on to a bad 2020 and pushing some revenues out to 2021 to begin ensuring it’s an upward trend in your multi-year view.
If you do find yourself now thinking about managing your product and service deliveries these last 60 days and possibly moving some out to build a stronger 2021, you certainly want to have in mind commitments you’ve made to customers for November and December and only make changes if they also find this acceptable for their business. And in planning your revenues these last weeks of the year, you want to take into considerations the impact any movements will have on your profit trending picture, your business cash needs and of course year-end tax planning.
The bottom line is this. Don’t think about 2020 as a standalone year. Think about it in terms of how it will appear as a part of your company multi-year financial performance trending. Playing this movie forward can help you show a positive performance trend that will give a future acquirer confidence in the valuation they place on your business in the event you desire to sell.
