Business Valuation Vancouver
The Million Dollar Question (or Multi-Million),
What is My Business Worth?
Knowing what your business is worth is the key piece of information you need to complete retirement planning, strategic planning and future divestitures or acquisitions.
It's More Than Just a Number
The first question we are asked when we meet with a business owner thinking of selling their business is, "What is My Business Worth?"
Business Sellers need to know what the value of their business is so they can make an informed decision if selling their business is right for them. Business Buyers need to know what a business is worth to ensure that they don't overpay for the business, and to make sure that they can secure some level of third party financing to buy the business.
How Much Is A Business Worth?
Business Valuations are based on a complex set of methodologies and industry standards as well as market indicators and the skill and experience of the business valuator.
The purpose of a business valuation is to determine what a Buyer would pay for your business in an open market. For most small business and the lower end of mid-market companies, a business valuation is based on arriving at the
Fair Market Value.
There are three generally accepted methods to valuing a small business:
The ASSET Method
The Assets of your business, minus any liabilities are considered the value of a business. There are numerous ways to determine the Asset value. This method is generally used for businesses that are not generating profits, or deemed to be a ''going concern" business. In most cases, the Asset Method does not accurately reflect the value of a business that is generating positive earnings.
The MARKET Method
Similar to the way real estate is valued, the Market Method compares your company to similar companies in your industry and geographical area. Business Brokers have access to databases to find details about what like businesses to yours have sold for. We compare gross sales and earnings of those businesses to your business. The Market Method is a useful and strong indicator of your businesses value.
The INCOME Method
The Value of your business is determined by the income stream that it will bring to a buyer. This method uses past and current earnings to predict future earnings. The assumption is that the buyer will maintain the current income levels as steady past earnings are a reasonable indicator of what the future earning probability of the business will me. Generally formulas are used that multiply earnings to get a value.
The methods above are provided in the simplest form possible. Within each method, there are many sub-categories and valuation techniques depending on the size of your business and your industry.
If your business is generating profits, there is a good chance that the primary method of valuing your business will be the Income Method, and the Market Method will be used to confirm the findings of the Income Method.
Nothing Kills a Deal Like A Bad Business Valuation.
This is true for both the Buyer and the Seller.
For the Seller:
If a Seller's business is incorrectly valued below the Fair Market Value of the business, it is unlikely that the Seller will list the business for sale as the value will likely not meet the Sellers needs in providing for retirement, buying another business, or investing. So the deal is dead before it starts.
For the Buyer:
If a Business is incorrectly valued above the Fair Market Value of the business, it is unlikely that the Buyer will be able to secure the third party financing needed to complete the business purchase. In addition, any Qualified Buyer completing proper due diligence and using the expertise of an experienced business broker and accountant will quickly determine that the business is overpriced and the buyer will walk away.
Business Valuation Services
Our Business Valuation Services begins by reviewing your financials, starting with your previous three year-ends, and your current year to date financial reports. But we go deeper and farther than just providing a financial analysis. We know how the real world works and how businesses are valued in actual market transactions.
We take the time to understand you and your business. What makes it unique. What are its value drivers. How is your business positioned in the marketplace and how do the current economic factors affect the value of your business if you were to sell it today.
We give you an accurate picture of what the current market value of your business is. We provide the Fair Market Value (FMV), the Most Probable Selling Price and a range of pricing options to fit your exit strategy, timing and other goals.
In the end, you have confidence and peace of mind knowing that you have the most accurate information and data at your disposal so you can make a sound decision.
Contact Us To Put Your Mind at Ease
Who Can Benefit from a Business Valuation?
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Sellers - Business Owners interested in selling their business
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Buyers - Individuals interested in purchasing a business
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Merger & Acquisition - Those interested in growth through strategic and targeted purchases
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Shareholders - Shareholder Agreements or shareholder disputes
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Income Tax - Estate freezes, corporate re-organizations and compliance
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Employee or Manager Purchase Option Plans
In all cases, we tailor our business valuation services to meet your needs, timeline and objectives.
