Company valuations have taken a hammering over the past two years as the disruption the coronavirus has wrought, has taken its toll. Shareholders have seen the value of their holdings in many sectors plummet as they were forced to keep funding their business despite its state of stasis as the country shut down.
However, despite all the disruption since March 2020, an annual valuation of your business remains the single most important and informative financial measurement any owner, manager or shareholder can complete.
Plimsoll has completed individual, bespoke valuation studies for the businesses of more than 40,000 clients. As part of our comprehensive suite of market analyses, we have also valued almost 1 million businesses in nearly 2000 different sectors of the UK economy. As we start 2022, we have assessed some of the latest valuation trends, identified industries with notable valuation trends and developed some tips to recover the value in any business.
Based on our latest insight and valuation intelligence, we can see, quite clearly, the impact that the pandemic, and to a lesser extent, Brexit has had on business valuations in the United Kingdom:
- Average business values across the UK economy are down 5% in the latest financial year
- 62% of companies have seen their value fall in the same period
- 1 in 10 UK companies has lost a third of their value this year
The extent to which the last two years have affected business performance and, consequently, valuations need to be assessed in context. Were industry valuations rising in your industry before the pandemic or were you insulated from the pandemic? Are valuations falling as doing business with the EU becomes cumbersome post-Brexit? Plimsoll helps business owners and decision-makers to focus on valuation trends across their competitive landscape and compare their own performance, regardless of any external factors.
As we transition into 2022, there are some industries that have seen valuation soar. As the world got caught in the chaos of COVID-19, so purveyors of high demand items were rewarded with fabulous boosts in company values. Some of the most notable markets include:
Cycle shops – At the start of the pandemic lockdown, exercise was the only legal reason to leave home, so demand for cycles soared and with it the values of those selling them. Average values are up by 34% in the latest period.
Hot Tubs – The explosion in home-spa equipment was a direct consequence of the public being house bound throughout 2020. As a result, suppliers of back garden hot tubs have seen valuation jump by 33% this past year.
Biotechnology – From vaccines to sustainable fuels, demand for enhanced crop yields to water waste management, the biotech market is in ever-increasing demand. Values across the market, despite high R&D costs and capital requirements, are rising by more than 30%.
Not all sectors of the economy have fared nearly as well. Entire sectors of the economy have seen a collapse in values. In the travel sector, for example, whether cruise specialists or educational travel operators, travel agents or business travel providers…there has been a more than 40% fall in average values according to Plimsoll’s latest insights. However, there are some industries where falls in overall value may come as a surprise:
Shipbroking – Despite rocketing container prices the benefit doesn’t appear to be working its way through to the brokerages. Average values in the UK shipbroking market have fallen by 31% in the latest year.
Spirit producers – The perception that much of the population drank too much during the pandemic hasn’t led to increased valuation of the purveyors of spirits. Average values in the latest year have fallen by 29% over the latest trading period.
Vaping Products – Despite being one of the UK’s fastest-growing markets as even the medical community encourages people to ditch traditional tobacco for vaping, average values have fallen by more than a quarter in the last year.
Whether your industry is intermittently locked down, buffeted by new Brexit difficulties, in decline or enjoying nothing but macroeconomic good fortune, valuing your business each year remains a necessity. Plimsoll offers several cost-effective and efficient services to allow you to maintain a valuation of your business, even in these fractious, uncertain times.
As the UK’s leading independent business valuation experts, Plimsoll has identified a few key considerations as you attempt to recover or maintain your business valuation in 2022:
Step 1 – Know your value now
Knowing what your overall current valuation is, comparing it to key rivals and the prevailing trend in business values in your market, allows you to put your performance into clear context.
Step 2 – Identify your strengths and weaknesses
Which parts of your business are losing value and what are your strengths? All companies need to understand which bits of their business are returning the most value and identify where profit and productivity are being lost.
Step 3 – Fix your dependencies
As the pandemic has demonstrated, being exposed to a narrow audience or market leaves companies vulnerable to serious loss of business value. Identifying markets to diversify into is a necessary step to protect business value heading into 2022.
Step 4 – Have a list of M&A targets
Having a list of companies you could purchase adds value to your business. Whether it’s buying a rival to consolidate your position or incorporating part of your value chain, having a list of options and understanding their impact on your current group is key to adding value.
Step 5 – Know your potential value
The final step is to identify what your future value could be if you tweak your performance to maximize profit, growth, and productivity.
Plimsoll offers a range of products and services that will help you to maintain control over all the elements of your business performance and its overall value. Whether you want a focused independent valuation of your business or want to compare your valuation across the many companies you compete against, Plimsoll can present the answers – instantly.
Please visit www.plimsoll.co.uk or call us on 01642 626400 to discuss how we can help you today.