FOUR TIPS FOR GETTING AN ACCURATE BUSINESS VALUATION

In this day and age, especially in these uncertain times, it is important to know just how much your business or company is worth both in business and personal terms. Knowing the value of your company is especially important when the time comes and you decide you want to sell, leverage, or re-organize your company. Additionally, business valuation can give you an insight into where you stand in the market, how your business compares to your peers, and help owners develop a plan to increase the value into the future, it can also serve as a tool to improve the business general performance. As a matter of fact, the list of reasons to do a valuation for your business is endless; but how can you help ensure an accurate valuation of your business or company?

1. Consult a Chartered Business Valuation Firm

It starts with choosing the right professional for the job, a chartered business valuation firm can work with you throughout every step of the valuation process to ensure that you are getting a fair, objective and accurate assessment. Be careful using business brokers who have an inherent conflict of interest (as they earn commissions) or unaccredited consultants offering cheap valuations that don’t carry the proper credentials to value one of your most valuable assets. Like in most things in life, you typically get what you pay for.

2. Organize Your Documents and Business Collateral

It is essential that you remain organized throughout the entire valuation process so you can easily access all the required information. Don’t lose track of important items that could impact the value of the business. Past financial statements, future-looking forecasts, business and marketing plans, copies of material customer contracts, employment contracts, employee policy manuals, business systems and procedures manuals, equipment and property leases, list of extraordinary revenues, expenses, or personal perks and shareholder agreements just to name a few.

A business valuator is looking for all the value drivers and the risks associated with your business and its cash flows; demonstrate sustainable growing cash flows at lower risk and your business value will be higher. The financial information is the quantitative information the rest is all the qualitative information the “color” around the facts, the risks.

3. Take inventory of your tangible and intangible assets.

Prepare a list of all the tangible (physical) and intangible (soft) assets of the business. Tangible assets include: real estate, equipment, vehicles, fixtures, leasehold improvements while the intangible assets are assets such as patents, trademarks, intellectual property, and customer lists.

While most small to medium size businesses (SME’s) tend to be valued based on their cash-generating ability, the identifiable tangible and intangible assets under an Asset-Approach set a floor value of the business; the higher this value (all things being equal) the lower the risk of the business resulting in a higher going concern value.

4. Collect and organize industry-relevant information

While Chartered Business Valuators will conduct their own market and industry research, it is immensely helpful if the client can provide additional information, sources about the inner workings, future opportunities, and past experiences from an insider's perspective. In many cases, clients have access to trade publications, industry association databases that may be difficult for a valuator to gain assess to in a timely manner. We always aim to have the widest view available to which to draw conclusion from.

In Summary

By taking a few preparatory steps to get organized, answer questions quickly, you will help an experienced business valuator capture all the relevant facts that will drive a more accurate value conclusion of your business. If you want to work with an experienced business valuation firm and get an accurate appraisal, contact us, a member of Malahat Valuation Group will be happy to help.

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What do we do:

Malahat Valuation Group specializes in business valuation and real estate appraisals to owners of privately owned companies and their professional advisors.

Why it matters:

When business owners and their professional advisors need to sell, leverage or reorganize their assets, we answer the age old question of "what is it worth"?

Who cares:

We provide our clients and their advisors a piece-of-mind by providing professional valuations that stand up to scrutiny from lenders, the Courts and the CRA.