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What Can Valuations Do For You?

11/12/2008


Ownership changes are common in the business world and can take place for a variety of reasons, including retiring owners, next-generation succession planning, or passing on your business to individuals who can take your business to the next level. Research indicates that many current business owners will be exiting from their business within the next ten years. Baby boomers, in particular, will need to take that next step towards preparing for a transition. To begin, you need a clear understanding of what your business is worth and what drives that value.

A valuation specialist can provide the expertise you need to gain a better understanding of what your business is worth and help you identify the key factors that influence the value of your business now and in the future. These key factors are not strictly numeric and it is useful to remember that a business valuation is not strictly a number crunching exercise. Once you have determined a valuation for your business, you can estimate if the potential sale sum is enough for you to retire or not. The valuation process can also reveal new ways for you to increase the value of your business and to maintain that value in difficult and uncertain economic times.

Given the state of the global market-place, we are living in very interesting times. Canadian businesses are not immune to the financial turmoil unfolding in the U.S. There are direct and indirect impacts on business prospects. We already see signs that financial institutions have tightened their lending policies, restricting their ability to finance business sale transactions. Certain economists are also predicting a recession for Canada with an extended recovery period. If that occurs, it is difficult to see how business prospects would not be negatively affected.

A business valuation is quite closely tied into succession planning and should serve as the starting point for the exit strategy process. It is important to have a conversation with an experienced business valuations specialist so that you can better understand your changing business environment and have a point from which to start planning for your future business transition. A thorough understanding of how the value of your business is derived, will enable you to make better decisions as a business owner.

For more information, contact W. Randy Dykin, CA, CBV, at Meyers Norris Penny in the Brooks office at 403.362.8909 or at [email protected]