Valuation reports are a key part of any pending transaction concerning your business. When selling your business in the GTA, obtaining a professional, independent business valuation helps manage your expectations with respect to the business’ market value and how much it can be sold for. A valuation report also provides useful information for entering into negotiations with a potential purchaser. When done early enough, it can help you identify areas in your business you should focus on to enhance its value prior to the sale.
Keep reading to learn more about the importance of a valuation when selling your business in a highly-competitive market such as the GTA:
Business Valuation for Pre-Sale Planning
A business valuation is a critical step in pre-sale planning that all business owners should carefully undertake. It is expected that between 60 to 75% of business owners will be exiting their businesses in the near future. That equates to a transfer of over $10 trillion in private wealth, the largest in recent history. With the sheer number of businesses going up on the market, the increasing supply will put a downward pressure on sale prices. As such, buyers will only pay top dollar for the most attractive businesses – and making yours one in time for a highly profitable sale takes time.
To be effective, pre-sale planning must begin at least 3 years before the target sale date, and it begins with a business valuation. A business valuation for pre-sale planning provides: an indication of what the business owner could reasonably expect to sell for in the market today; as well as a benchmark for enhancing the value of the business prior to the sale in order to maximize the sale price and net proceeds received.
When conducting a valuation for selling your business in the GTA, the business valuation process involves a careful assessment of the company’s risk profile and the key value drivers for the business. A share valuation conducted by a professional valuator identifies areas of weakness, as well as key value drivers to focus on for the business to become more attractive to a potential buyer. As such, conducting a valuation for selling your business should be done early enough in order to have sufficient time for implementing key value enhancement initiatives that will maximize the value of the business and the price that is ultimately received in a sale. This process leads your business to become more liquid and more easily monetized.
Business Valuation for Sale of a Business to a Third Party
Recent business succession in Canada, particularly in the GTA, has led to an increasing number of owners expecting to sell their business externally to a third party. However, there is only a small window of time open before aging baby boomers begin to flood the market with businesses for sale. For this, thorough preparation requires a business valuation to guide a sale of a business at the maximum possible price.
Despite the common occurrence of selling a business in today’s market, many owners make the mistake of grossly underestimating or overestimating the value of their business. To correct this, it helps to invest in an independent business valuation. Here are the top reasons why you should invest in a valuation for selling your business:
- Manage your pricing expectations which increases the likelihood of a deal being closed;
- Justify the asking price and provide support for negotiating the price with a potential buyer;
- Prepare for any unsolicited offers received from competitors or other industry participants;
- Identify potential buyers or purchaser categories;
- Educates you regarding the “stand-alone” and “synergistic” values, and the notion that these values vary among buyers; and
- Maximize the sale price, ensuring that no money is left on the table.
Getting a professional business valuation now allows you to take advantage of opportunities in the GTA’s current market. When you are ready to sell your business and you have a a proper valuation, you are better equipped to take advantage of market timing that vastly increases your chances of maximizing the sale price and, ultimately, the net proceeds that end up in your pocket for your next ventures in Canada.