The Income Tax Act which is the legislation governing business valuations in Canada Policy Statement is specific in that it does not give special status. “The valuator must use reasonable judgment and objectivity” (which suggests experience).
“Fair market value” and “giving more weight to certain relevant factors” are recurring themes one finds in the Canadian Income Tax Act Policy Paper. The Policy Paper in Point 7 demands that “certain of the relevant factors may be accorded greater weight”. In 2022 and going forward we know intangible assets are the largest asset group, in many cases up to 90% of company value is intangible assets.
Our methodology includes 25 Factors and 5 robust Position Papers with emphasis on weighing intangible assets to reach fair market value. When using the 25 Factors methodology, we follow the Income Tax Act Policy Paper.
We think our way through the business valuation, following the 41 point Canada Revenue Agency Policy Paper.
What you get is a “Hands On” or more properly speaking, a “Mind On” valuation by a business professional who understands how to use the 25 Factors Affecting Business Valuation system supported by the extensive Position Papers that go with them.
One must turn on the mind and let the 25 factors methodology work.
This is where the valuator needs to have significant business experience. Our business valuations are done only by people who have had 10 years or more experience in owning and operating a small business, “learning to do by doing” and gaining the necessary experience and wisdom. This is experience, wisdom, and skill sets that can never be taught in a course or at a school?
This is hard for some to understand but If you are a seasoned business owner, you understand well the skill sets I am referring to.
Intangible assets are strategically important, and generally the largest part of business value that must be fully weighed in a business valuation to be compliant with point #7 in the Income Tax Act Policy Paper.
Without this business experience the valuator is not going to pick up on the nuances, and would likely miss a lot of sub factors in the business during the intake process.
To our knowledge there is no competing business valuation group or association with such a robust methodology or system in place to value intangible assets necessary to produce a fair market value business valuation in Canada or the world that meets or exceeds the 41 points described in the Canada Revenue Agency Policy Statement On Business Equity Valuations.