25 Factors Affecting Business Valuation
The object of the methodology is to determine the factors and sub factors within a business and weigh them as required in point 7 of the Income Tax Act Policy Paper.
- Utility, Sustainability, and Scalability
- Cumulative Value of Marketing, Brand, and Advertising
- Cumulative Value of Research and Development
- Cumulative Value of the Workforce – Key Employees, Management, Regular Employees, and Contractors.
- Value of the Client Base.
The Position Papers provide real world proof, with examples, that the factors are real, important, and purposefully dovetail with the 41 points in the Income Tax Act Policy Paper.
I discuss with clients, in depth, the relevant 25 Factors to find what weight should be given to each factor as the act requires for reaching the fair market value. As we go through these 25 Factors, other sub factors almost always come up. Examples might be “scarcity” or “timing”. This is where business experience enters into the process. In my experience I have found hundreds of “sub factors”.
25 Factors Affecting Business Valuation system does not consider unverified mass purchased, business sale price data to be reliable enough to be used in compiling “comparable sales information”, which may or may not be “comparable”. Who spoke to the seller?
Canada leads the world on business valuation governance.
This is important because all reasonable actions have been taken to ensure Eric Jordan’s 25 Factors are in compliance with “Policy Statement on Business Equity Valuations,” From Canada Revenue Agency, No: 89-3, Date: August 25. 1989. (Modified 2002-08-27). Ensuring you are in the best possible hands for business valuation compliance.