If you require independent business valuation support or transaction advisory services in Toronto, look no further. Our company valuation service in Toronto provides reliable and credible independent valuation support for a range of situations, including share transactions, reorganizations, shareholder buy-outs or buy-ins, disputes between shareholders, value enhancement initiatives, tax and estate planning, matrimonial disputes, commercial disputes, insurance coverage assessments, and exit or pre-sale planning. It’s crucial to have an independent valuation professional with the confidence and expertise to provide objective and accurate assessments for these complex matters.
Whether you’re an individual, a business owner, or a professional advisor, our team is here to provide the support you need to achieve your objectives. Let’s look at three common questions that business owners need to answer on their way to a successful exit.
Question 1: What is your business worth?
Common Assumptions: Most owners base their estimates of their businesses’ value on prices they’ve heard quoted for similar businesses. Additionally, many owners tend to overvalue their businesses, which prevents them from growing value and often leads to a rocky exit at best. Building business value often takes years, so it’s important for owners to understand what their businesses are worth currently to avoid any surprises when they are ready to exit.
Requirement: Owners must base their estimates of business value on the estimate of a well-experienced valuation expert. While estimates don’t quite rise to the level of fact, they are far more reliable than owners’ guesses, which are often based on what they have heard about valuation multiples in their industries.
Question 2: At what rate do you expect your cash flow and business value to grow?
Common Assumptions: Business owners tend to be far, far too optimistic about projecting future growth. While this optimism is the driving force behind starting a business, it can cut owners’ efforts to exit at the knees. So, owners need to ask, “Does my estimate of business growth exceed its historical rate? Do the facts support my estimate?” It’s likely that many
owners’ initial estimates will be well off.
Requirement: The business owners should base their estimates of future growth on actual past growth rates and amounts. If an owner projects future growth that exceeds historical growth, that owner must document why cash flow, revenues, and profitability will exceed historical patterns and by how much.
Sources of Accurate Information: A CPA or business consultant should advise the business owner in projecting future growth. Additionally, owners should monitor and adjust the CPA or business consultant’s projections over time. An essential part of most Exit Plans is the
development and refinement of written growth plans. Current plans and, most importantly, future growth plans are modified based on actual experience.
Question 3: What will the net proceeds be from the sale of your business?
Common Assumptions: In calculating how much they’ll receive from sale proceeds, most owners simply deduct capital-gains taxes from the sale price they expect. However, this is not enough. They also need to deduct the costs of sale, repayment of company debt, perhaps ordinary income- tax consequences on the sale of assets, and a likely owner carryback or
earn-out of a significant part of the purchase price.
Requirement: In addition to capital-gains taxes, there are several reductions to the proceeds owners receive at closing: business debt, selling costs, owner promissory notes carrybacks, earn-outs, and the like.
Sources of Accurate Information: Knowledgeable professionals (such as CPA, M&Advisors or transaction attorney) can provide guidance on likely deductions from sale proceeds for a relatively low cost.