Q: What is Fair Market Value?
A: Fair market value is the price at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, neither of whom are under any compulsion to buy or sell, with both having reasonable knowledge of relevant facts
Q: What is my Business Worth?
A: Every business owner wonders what the current market value of their business is. Unfortunately, there is no one quick 'rule of thumb' to help determine the value of a business. One of the reasons that business valuations are performed is to take the guess-work out of valuing the business.
Q: What is a Valuation?
A: A valuation is a determination of the value of a business interest based on an analysis of the financial records of the organization, the environment in which it operates, and the risk associated with an investment in the organization.
Q: Why are business valuations important?
A: Business brokers estimate that businesses sell 35 percent faster when a valuation has been completed for the business. Valuations ensure that accurate values are placed on businesses by using industry standard models with proven results.
Q: Can my accountant value my business?
A: They can but most accountants don't focus on valuations and buyers often believe that the company accountant is too close to (the seller's) home. Many accountants offer their clients a simple formula of a multiple of earnings. We recommend against picking a multiple that feels right or good in pricing your business in favour of a methodology which utilizes various valuation approaches to arrive at the value of a business.
Q: I am selling my business. Do buyers really accept independent valuations?
A: If you put yourself in the position of a buyer, ask yourself which value you would be more comfortable with: one provided by the seller or one from an independent, unbiased party that specializes in business valuations. The advantages to using an independent party can be summarized as follows:
* Valuation companies use a number of methods and techniques in developing the finished product
* An independent valuation specialist is much more credible to a buyer and their advisors
* In general, accountants and lawyers are not trained in the valuation methodologies
* Valuation companies have large historical databases they use to compare a business to other businesses in the same market segment. Typically, local financial advisors do not have access to this type or range of information
Q: My business had a difficult time and lost money last year and/or this year. Does this mean it does not have any value?
A: Not necessarily. First, the reason for the loss should be considered. If the industry/economy as a whole are experiencing losses, the business loss may be part of a business cycle. Also, if the business is fairly new, revenues may not have yet reached a level to meet necessary expenses.
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