Archive for December 7th, 2015

2015
07
Dec

Business Valuation for Small and Medium Sized Enterprises

Posted in Tax Accountant

The economic engine of Canada is fueled in large part by small and medium sized enterprises (SME), but owners of these businesses are mostly baby boomers. The elder boomers have already reached retirement age while the youngest ones in the group are now over 50 years old. This implies that a good portion of SMEs will be put up for sale in the next few years as the kids of baby boomers (millennial generation) have mostly carved their own careers away from the limelight of the family business.
Unfortunately, many business owners do not fully comprehend the value of their organization when they put it up for sale. A common refrain that accountants in Mississauga and Brampton hear is the regret expressed by those selling their businesses. This is a frequent occurrence since too many people believe their business is only worth what the other party is willing to fork over to purchase it.
This is not the right way to frame the sale of your company. You would never think this way when it comes to your family home. As you spend a lot of time in your home, spending money and efforts to maintain and update it, you know best the value of your house and would not sell it for a minimum acceptable price. This is exactly the same situation with your business, because only you know the value of the intangibles in your business.
Agreeing on the value of tangible assets is relatively a simple task, but it is those intangibles that can really drive up the selling price of your business to its proper value. Items like the importance of your customer list, contracts in place with large customers, agreements with suppliers, reputation of your business, skills of your employees are all worth a certain amount and are often sold at a discount by SME owners.
Chartered accountants can help you quantify these values and give you a better estimate. This can empower you and give you confidence during negotiations with a potential buyer. By consulting an accountant in Mississauga and Brampton before you even reach the decision to sell, you can take steps to increase the value of the business as you approach retirement. Based on the guidance and advice you receive from an accountant, you can implement policies and processes which may enable you to fetch a higher price for your lifelong work.
Potential purchasers can also benefit from consultations with professional accountants to ensure they do not pay more than the market value for a business. If you cannot see the value of intangibles, but really like a business, perhaps a meeting with an accountant will help confirm or alleviate your concerns as to the seller’s valuation of his or her business.
The Toronto area is the biggest economic zone in Canada, therefore, accountants in Mississauga and Brampton encounter an abundance of SMEs which are put up for sale, and have a lot of experience in valuating businesses. We recommend you consult or retain the services of a qualified professional accountant if you are thinking of selling your business.


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