Why should business owners get an independent business valuation?
An independent valuation can be a starting point for long-term strategic planning and an objective reality check. Whether your business is a start-up, established and growing, or at its prime, it is important to understand its enterprise value. A professional third party inspects and analyzes the market, industry and the entire business — including assets, depreciation and other internal and external factors — then applies appropriate methodologies to reach a reasonable opinion of value. Ideally, more than one methodology is applied so all stakeholders see a clearer picture over time.
Why would you need to know what your business is worth?
- Divorce — a business built or acquired during the marriage may be part of asset division; an unbiased valuation helps you and the court make an informed decision
- Selling a business — an objective market value sets a realistic asking price, builds confidence in negotiations and supports lender financing
- Transition planning — a baseline assessment reveals gaps between what you have and what you need to meet your goals
- Strategic planning — uncovers opportunities to grow revenue and reduce costs to operate more efficiently
- Attracting equity investment — a complete snapshot of financial health and growth potential for private equity, family offices, angels and venture funds
- Growth financing — detailed financials streamline approval for equipment, remodelling or payroll needs
- Value protection — helps size insurance coverage and can influence co-owner life insurance and disaster payouts
- Buying out a partner — determines a fair value for an exiting owner's interest
- Management buyout — values an older generation's stake for the management team to acquire
- Estate planning — up-to-date records help whoever takes over keep your estate in order
Key facts: why owners get an independent valuation
An independent valuation supports strategic planning and provides an objective reality check
A professional applies more than one methodology for a clearer picture over time
Triggers: divorce, sale, transition, strategic planning, raising equity, financing, insurance, partner or management buyout, estate planning
Regular third-party assessments help protect and grow enterprise value
If this content was useful, the rest of the Selling Your Canadian Business library is one click away. Visit www.sellingyourcanadianbusiness.ca for a monthly newsletter, audio podcast, and video interviews with Canadian advisors. Subscribe now to The Canadian Exit Briefing for exclusive articles, guides and reports written for Canadian business owners and their advisors. Pass this article along to another owner who is working through the same questions.
Disclaimer: This article is for general informational purposes only and does not constitute legal, tax or financial advice. Consult qualified advisors regarding your specific circumstances.
