Valuing micro and small businesses in the shadow of COVID-19 is daunting. COVID-19’s effects on the economy has magnified risk and uncertainty for small business, making the job of valuators more difficult. Join small business broker, attorney, valuation professional, and author Gregory Caruso for a deep dive into problematic areas of actual small-business valuation cases. With a review of how the theory ties into the actual application of methods using best practices and professional judgment, this event will be hands on with multiple case studies, audience questions, and succinct opinions welcomed.

Topics will be addressed in a case study format of companies valued after the advent of COVID-19. We will start with the simple and move on to more complex topics. Cases reviewed may be added to or modified as conditions change.

• Intro
  • Why micro and small businesses are inherently more risky than larger businesses
• How COVID-19 has magnified those risks

• Case 1—Additional procedures, questions, and methods to examine the company due to COVID-19 increased risk (liquor store)
  • Reporting, COVID-19 section, subsequent events, additional disclaimers, etc.
  • Additional questions and management interview
  • Additional resources
  • What have I missed—always the biggest risk
  • Is this reasonable—increased reliance on professional judgment
  • Developing and selecting a cash flow for the market method
  • Developing and selecting a multiplier for the market method
  • No balance sheet—now what?
• Case 2—Adjusting the multiplier or developing a marketability discount due to volatility or economic uncertainty due to possible future COVID-19-related economic recession in a typical service-type business (engine repair company);

• Case 3—Working from poor projections for a business with a few critical future contracts (unawarded) and related income method matters including adjusting and normalizing the balance sheet (general contractor)
  • One-time adjustments/cash flow?
• Tax-affecting cash flows for income method
• Reviewing a projection for use or to better understand future cash flows
• Developing a capitalization rate with a focus on company-specific risk
• Balance sheet issues and business valuation

• Solvency and going-concern issues
• Included assets and valuation adjustments
• Working capital and excess net current asset calculations

• Distinguish differing risk factors between large companies and micro and very small companies.

• Collection of qualitative data that I refer to as “soft data” such as internal soft data (processes, management, etc.) and external soft data (economy, industry, etc.) and then the application of findings to valuation cash flows and risk adjustments.

• Developing and selecting a cash flow in the market and income methods including add-backs and adjustments, weighting, support documentation, and tax affecting for the income method.

• Selecting a multiplier in the market method and developing a capitalization rate for the income method as it pertains to micro and small businesses.

• Estimating and applying a marketability discount for a control interest for periods of high uncertainty.

• Reviewing a projection to determine suitability as a forecast and to then apply to future cash-flow estimates.