The more common valuation techniques used in practice today focus on the cash flows or earnings generated by a business; however, how does one value a business that doesn’t even have any sales yet, let alone positive cash flows? This is a frequently encountered issue when valuing start-up businesses who may have a great idea … Continue reading »
In a valuation report there may be some valuation-specific terms that you may not be familiar with if you have not previously reviewed a valuation report. Therefore, we thought it would be helpful to set out some of the key terms that you will likely encounter in a valuation report. “En Bloc” fair market value … Continue reading »
When we prepare valuation reports, we most often do so under the standard definition of Fair Market Value (FMV). The actual price paid for a business may differ from its FMV. A detailed analysis of the standard definition can illustrate why these differences may have arisen. The standard definition of FMV is set out below: … Continue reading »
Over the years we have been hired to calculate losses of income suffered by businesses affected by events beyond their control. Some of the more common “unforeseen” events include: Owner/operator suffered injuries in a motor vehicle accident; The business had to move due to an expropriation of some or all of its premises; An event … Continue reading »
We generally request management forecasts to assist us in preparing a valuation of a business. The forecast helps us gain a better understanding of the expected trends of the business. For those businesses that are in start-up mode or going through some significant changes, we would ideally like to have a two or three year … Continue reading »
If you are considering establishing, buying into, or bringing a new shareholder into, an incorporated business, we strongly suggest that you get a shareholders’ agreement at the outset of the relationship. Shareholders’ agreements, among other things, set out how key business decisions are to be made, define how the shares of the company are to … Continue reading »
From a business valuation perspective, non-operating assets (often referred to as “redundant” assets) are assets owned by a company, but not used in the day-to-day operations of the business. Common redundant assets include cash, marketable securities, loans receivable, unutilized equipment and vacant land. The identification of non-operating assets is an important step in the valuation … Continue reading »
One issue that we encounter on a regular basis when selling a business is the reluctance on the part of a business owner to provide information regarding their business to a prospective buyer. This reluctance is only natural. Private businesses are inherently private. However, a desire to not disclose information simply for privacy’s sake can … Continue reading »
Weighted average cost of capital is the cost to a business of raising capital. This capital can take the form of equity (common or preferred shares) or debt, or some combination of debt and equity. The cost of debt is generally determined to be the interest rate which would be charged to the business if … Continue reading »
The commonly accepted definition of fair market value used by Chartered Business Valuators is “the highest price available in an open and unrestricted market between informed and prudent parties, under no compulsion to act and acting at arm’s length, expressed in terms of money or money’s worth”. While this may seem like an overly wordy … Continue reading »