3 reasons business valuation during divorce is different in 2022

On Behalf of | Apr 20, 2022 | High Asset Divorce |

Those who have business interests need to take special care during divorce. In addition to taking steps to better ensure operations continue with minimal impact from the divorce, they must also work to ensure they retain ownership after the divorce. This is possible. The business owner can retain ownership by giving up another asset of similar value.

But what is the value of the business? This question has arguably never been harder to answer than it is right now. Businesses in every industry, from hospitality to healthcare, have experienced the impact of the pandemic. Three specific ways that this period in history has impacted business valuation include:

  • Unreliable figures from 2020. In the past, business valuation would include a review of the performance from previous quarters. This is unlikely to provide accurate information as a chunk of that time was likely during stay-at-home orders and forced shutdowns.
  • Impact of regulation. Whether or not a business chose to take advantage of various funding programs like the Paycheck Protection Program (PPP) or Small Business Debt Relief Program to get through the pandemic could also play a role in its valuation. This is unique as there is some debate on whether this aid should remain on the business’ ledger or not for valuation purposes.
  • Uncertain future. Between continued supply chain disruptions and rising inflation rates it is extremely difficult to determine the long-term impact of our current financial climate on the future valuation of a business.

Business owners can help to better ensure these factors are considered during negotiations by including the events that likely impacted business performance within the discussion. Financial experts recommend valuators take various approaches when putting together a valuation to help provide numbers that can more reliably guide these conversations.