How Business Valuations helps in decision making

It’s not uncommon for business owners to be aware of the valuation of their company. What is surprising is that many don’t realize the different ways a company valuation can be used in your every-day and strategic business decision-making process.

There are certain occasions that call for calculating the valuation of a company. Some of these occasions are, for example, looking for investment, leveraging assets, acquisitions, issuing stock, forming employee ownership stock plans, etc.

Genuinely, valuations are useful in the beginning phase of a company. Founders can find out a lot about their own company, customers and market by having a general understanding of their company value. On the other side of the spectrum, business owners who are planning an exit strategy or a succession plan can also benefit from knowing the objective value of their company.

Generally, business owners who know of their company value are in a much better place to make strategic decisions regarding their business, simply because they have an understanding of the true situation of their company.

Business owners can use valuations for estate planning, determining life insurance needs, setting a buy/sell agreement, setting up incentive plans for the management team.

To us, somewhat more important than the rest is looking for a way to increase your value over time. Only after you understand what the business is worth you can start setting goals for where you want your value to be in the future and what levers to pull to reach those goals.

Some key areas to focus on to grow your value are:

Increase cash flow – investors are interested in future cash flows. Increasing the cash flows will increase the valuation all things being equal. You can do that by increasing revenues or improve margins.
Decrease business risk – Business risks are issues such as reliance on the owner or management, customer concentration, revenue variability and others. The bigger the risk, the higher the rate of return required by an investor and therefore the lower the value.
Business Growth – generally, the higher the growth rate, the higher the value of a business.

At Malahat Valuation Group, we help our clients determine the Fair Market Value of their business, shares and assets, so that better decisions about their businesses can be made.

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What do we do:

Malahat Valuation Group specializes in business valuations and equipment appraisals to owners of established 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 with professional valuations that stand up to scrutiny from lenders, the Courts and CRA.