The process of calculating a business’s or company’s economic value is known as business valuation. When a business owner wishes to sell their firm, buy another company, look for investors, or for a number of other reasons like tax planning, estate planning, or litigation, they often do this.
Analyzing a company’s financial statements, assets, liabilities, cash flow, market circumstances, industry trends, and the overall state of the economy are among the many aspects that go into business valuation. The goal is to determine the business’s value based on its potential to provide future income and its relative risk in relation to other investments.
Our business valuation fees are generally $1,500 to $15,000 average of $3,500.
The time may vary depending on the complexity of the business, the accessibility and reliability of financial data, the objective of the valuation, and the experience of the valuation expert or organization conducting the research can all affect how quickly a business assessment is completed.
But, usually it’s 7 to 14 days.
Eric’s 25 Factors Methodology Resolving Non-Compliance Issues
- Intangible Assets must be measured in order to calculate “fair market value” and be compliant with the income tax act.
- Unverified or incomplete business sale price data must not be used to calculate “fair market value” in a compliant business valuation.
There are over 217,000 accountants in Canada and internationally who hold the Canadian CPA designation. Thankfully less than 2% of these CPA’s engage in what I believe are non-compliant business valuations where they don’t properly account for Intellectual Property, and may use unverified mass purchased, business sale price data to render “comparable sales information” which may or may not be “comparable”. Who spoke to the seller?
This means there is more than a 98% chance your accountant is one of those who stick to accounting.
Many accountants have us do valuation work for their clients who are doing Section 86 Estate Freeze or Section 85 Rollover procedures.
Comparable Sales prices are legitimate factors when one is valuing tangible assets such as farm machinery, construction equipment, restaurant equipment, and residential housing in similar areas where there are many recent sales to use for price comparison. Unverified comparable sale prices for business valuations should never be used in an Income Tax Act compliant business valuation. The type of information a valuator would need to establish a true “comparable sale price” is usually very private information and I highly doubt families and private businesses would release it.
If you were comparing 6 oil and gas drilling companies each doing in the 10 Million dollar range a year in sales within the same geographic location and province or state with the same rules and regulation; then the comparisons between the public and private company could be similar and likely a good comparable. This is a far stretch from what the data sellers are offering.