SME Valuation provides independent business valuation and related expert advisory services to small/mid-size businesses and their advisors in the Greater Toronto Area.  Our services include business valuation reports, business purchase/sale advisory and financial consulting.

The Importance of Obtaining a Business Valuation Before Buying or Selling a Business

Obtaining expert and independent advice before you buy or sell a business is crucial to help ensure you make a sound investment decision and not overlook important issues.  Moreover, a business valuator helps:

• Put financial and business considerations ahead of emotion in the acquisition/sale decision
• Identify major issues and assumptions which have a significant impact on your investment decision

Intermediaries involved in the purchase/sale of small companies are usually not qualified to value a business.  As well, their compensation is usually directly tied to the transaction, so they are not independent. A business valuation expert will make sure your pricing decisions are based on proper financial principles. Common valuation errors include:

•           Over-reliance on rules of thumb
•           Inappropriate application of earnings multiples
•           Lack of market research
•           Poor projection skills
•           Lack of understanding of impact of future capital investment versus depreciation
•           Improper adjustment of past earnings
•           Inappropriate treatment of debt, interest and taxes
•           Double counting of assets
•           Lack of detailed financial/operational analysis to understand value drivers
•           Lack of understanding of impact of working capital