Business Valuation

At Avalon Partners, we use our extensive market experience and international business valuation credentials to effectively value your company and provide a clear answer to one of the most common questions asked by our clients:

“What’s my business worth?”

You may be surprised to learn how pervasive this question is. According to a poll conducted by KPMG Canada, 46% of Canadian entrepreneurs don’t know what their business is worth.

Whether you are looking for a business valuation to buy or sell a business, a partnership buy-in or buy-out, gifting, inheritance, retirement or divorce; or need a valuation as part of a periodic strategic review to track the growth or market value of your business, our business appraisal methodology will provide you the essential information you need to understand the fair market value of your company.

The Business Valuation Process

Financial Analysis

Our business appraisal process begins with an analysis of your financial reports, including your profit and loss statements, balance sheets, tax returns and other financial data from the past three years.

Working together with your accountant or CPA, we will recast the financial statements to adjust for any discretionary or nonrecurring expenses or income that should be added back to the bottom line.

A thorough review of these will help us calculate your company’s cash flow. In smaller businesses, this is often referred to as Seller’s Discretionary Earnings (SDE). In larger businesses, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is typically used.

We then proceed with a review of your balance sheet to calculate the net working capital requirements that a buyer will need to support once they acquire the business.

Researching Comparable Businesses

An important part of the business valuation process is to identify businesses similar to yours and determine the valuations they received at the time of their sale.

We have access to several proprietary databases that capture this information and ensure that the comparisons are based on reliable and accurate data.

Analysis of Value Drivers

In addition to reviewing your financials and industry comparables, we also have the ability to analyze other key elements that may impact the value of your business, such as your growth prospects, customer satisfaction, market share, dependence on owner, key suppliers or employees, customer mix, recurring revenue streams, value of facility and equipment, and industry trends.

Buyer-Centric Analysis

In conducting our business valuation, it is also important to review the business from a buyer’s perspective. It is necessary to establish if the company will generate enough free cash flow to maintain operations during the transition period. Also of interest to the buyer is to understand the amount of time they will require to recoup their investment and how much free cash will be available to sustain their debt payments. This information is essential in the buyer’s acquisition process and will help them to review and justify the investment.

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