How Market Uncertainty Can Affect Business Value

Businesses face uncertain conditions today, including geopolitical and cybersecurity risks, inflation concerns, environmental issues, and a lack of clarity about future tax laws and interest rates. Here’s an overview of how business valuation professionals factor these kinds of issues into their value conclusions. Market analysis Before crunching the numbers, valuators must fully understand the market conditions in which the subject company currently operates. This involves evaluating macroeconomic indicators (such as growth in gross domestic production, inflation rates, interest rates and unemployment levels) and industry-specific factors (such as market trends, competitive landscape and regulatory changes). Analytical procedures may need to be more robust during times of market volatility. Valuators can’t presume that the subject company will maintain the status quo in uncertain markets. Moreover, some industries may be more...