Business Valuation And Guideline Income

Covid-19 And What It Means To Business Valuation And Guideline Income

How will Covid-19 impact the value of the business or the outcome of my legal matter?

If you are a business owner in the midst of a family law proceeding, if you have plans to sell your business, or if you are in embroiled in a shareholder dispute, we’re sure you’re asking this question. If you are a legal or accounting professional with clients in this situation, you may be asking, “How do I best advise my clients at this time?”.

While we do not have all the answers, we have written this article series to help answer that question.

Covid-19 feels unique as our generation has never faced a pandemic of this scale. From an economic perspective, however, we have experienced shocks before, such as the financial crisis of 2008. It’s important to keep the long-term perspective in mind and remember that our economy has always recovered from past shocks.

While unknown factors remain, such as the timing of vaccines or the possibility or severity of second waves of infection, we know that life cannot remain on hold forever. We are working hard to understand the economic implications of Covid-19, provide clarity where possible, and continue to provide fair, independent conclusions to allow you and your clients to move forward.

To help you understand what to expect over the coming year, we’ve summarized the Government of BC’s current Restart Plan as this will dictate much of the economic activity happening in the province.

BC’s 4 phase plan

We note that at the time of publishing this article, BC had announced a four phase plan to reopen the economy (

Phase 2 has already started which addresses the conditions around the reopening of most businesses. These businesses will need to have and implement a plan approved by WorkSafeBC to reduce the risks associated with Covid-19.

Phase 3 began in June and will continue if transmission rates remain low. Additional businesses excluded from reopening at Phase 2, including hotels, resorts, the film industry, and entertainment will be able to reopen with similar WorkSafeBC requirements. From a valuation perspective, Phase 2 and 3 are largely the same with the only difference being the specific businesses allowed to open in Phase 3.

Phase 4 will occur when a vaccine, “community” immunity, or broad, successful treatments are available. Phase 4 will allow the resumption of international tourism and large public gatherings, such as conventions, concerts, and sporting events.

From a valuation and guideline income perspective, we generally look at and treat the “new normal” of Phase 2/3 separately from the “normal” that will be restored in Phase 4.

In upcoming articles, we’ll share with you our thoughts on how Covid-19 is impacting the timing of valuations, the cash flows of businesses and other valuation considerations, as well as the tools available to deal with uncertainty.