HOW THE PROCESS WORKS

We conduct every business valuation as if there was going to be a sale of the subject business at “FAIR MARKET VALUE” as the tax act legislation in Canada and other countries require.
The legal definition of Fair Market Value in Canada, is the highest price, expressed in money, that property would bring in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other and neither party being under any compulsion to buy or sell.

A 2023 Business Valuation Report using the Eric Jordan “25 Factors Affecting Business” methodology:
A. Identifies
B. Measures
C. Weights
D. Estimates the value to all the tangible and intangible assets in a business.

ACCURACY is not possible without having an actionable plan that could find a buyer for the business you want evaluated.

METHODOLOGY
The Eric Jordan “25 Factors” methodology:
(1) Will show profiles of the most likely buyers of the subject business.
(3) Will show some reasonable plans to reach those profiles identified.
(4) Will show a marketing team who is capable of executing those plans to reach the profiles and at what cost and a time estimate for when a sale should be expected to happen.
(5) Will identify a corporate lawyer who has competent staff, who will not drop the ball and who will push a sale through. That same lawyer should be a tax expert who can advise the client on tax issues regarding the business sale.
(6) Will direct you to fractional employees you can hire to bring this all together.

OUR VALUATION FEES ARE GENERALLY $3,500 to $8,500

Total SALE FEES range 3% if you want to follow through and sell a business. Show more information.

If you are planning to sell following this methodology and internal sale plan expect fees to range from 1% on large deals to 8% on small deals; INCLUDING ALL LEGAL FEES AND TAX PLANNING ADVICE.

In comparison the real estate agents, business brokers, and merger and acquisition people say they can only sell 25% of businesses they list for sale. (at any price) while charging fees of 10% to 18% without legal fees. And they still charge retainer and monthly fees. Link

Harvard Law Review states that according to most studies, between 70 and 90 percent of Mergers and Acquisitions fail. Link

Business Valuation is our Business

However, we can and we will put business owners in touch with expert lawyers, fractional CFO’s and fractional marketing teams they can hire to sell their businesses effectively, efficiently, and in a timely manner usually between 3% and 8%. Yes, that does include legal fees. We are focused on business valuations. But the valuations we produce are not hypothetical, but actionable as demonstrated below.

EXAMPLES BELOW PROVE OUR ACCURACY

2023 - Fees were 3% of total sale:
We have a case in point where, in the valuation process, we determined that the business owner had been a welder prior to opening the subject business. We determined that trenchers, plumbers, or welders would be good buyer targets.

We put the seller in touch with a marketing team we know. The marketing team bought the profiles of the trenchers, plumbers, and welders in the area. The marketing team had an outbound caller making sales calls to these potential buyers. There was other social media advertising put in place.

The client was put in contact with a corporate lawyer, who is also a tax expert, to facilitate the transaction. The business valuation, the marketing and advertising, and the corporate lawyer all total, on a sale of just under a million dollars, was in the range of 3% of the total sale. The buyer was identified in the first week, but it took four months for the deal to close. (The business sold for 100% of the valuation price and yes we can let you talk to the seller)

2023 - Fees 7% range of total sale:
In a second case that was much smaller and a much different type of business, it was a different situation. The business valuation revealed that a Fractional CFO would be required to clean up the financial statements and take the business valuation and make credible projections based on the information the valuation report had uncovered.

The marketing team relied on social media and focused advertising to find the buyer and coordinate between the corporate lawyer, the fractional CFO, the business valuator and the seller. Fees 7% range for everything.

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What does the law say about business valuations?

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FACT 1:
The Income Tax Act is the only known legislation governing Business Valuation across Canada. “FAIR MARKET VALUE IS REQUIRED.” All reasonable actions are taken to ensure its compliance with "Policy Statement on Business Equity Valuations," From Canada Revenue Agency, No: 89-3, Date: August 25. 1989. (Modified 2002-08-27)

The answer is almost the same in every western nation.

What is the definition of Fair Market Value?

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FACT 2:
In Canada, Fair Market value is defined as:
“The highest price at which 100% of the tangible and intangible assets of an operating business would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or compulsion to sell and both having reasonable knowledge of relevant facts.”

Most valuations don't meet the legal definition in “FAIR MARKET VALUE”

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FACT 3:
Within the “Fair Market value” legal definition, it states:
willing buyer and a willing seller, neither being under compulsion to buy or compulsion to sell.

The comparison sales data most valuators, brokers, and agents use in their valuation reports is from sales where the seller is pressured, financing terms are missing, or other flaws exist, and therefore don’t meet the “fair market value” legal definition.

90% of business assets are intangible and most valuators have no methodology to measure them.

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What would the business being evaluated sell for today? Who would buy it? Why? For how much money today? How could that buyer be identified and found? Time and Cost.

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FACT 5:
By using Eric Jordan’s "25 Factors Affecting Business Valuation" to pinpoint the who, what, where, when, and how of the most likely "special interest purchaser" profiles; we succeed in identifying, measuring, weighing and placing a value estimate on the subject business that we have been able to prove accurate in 2023 sale example at 100% of valuation estimate.

CONCLUSION: REGARDLESS OF BUSINESS VALUATION PURPOSE

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IN ORDER TO BE COMPLIANT WITH THE LEGAL DEFINITION OF “fair market value” REGARDLESS of the valuation purpose, we must look at the business being evaluated as if it were being sold and be able to PROVE as best possible, what we believe this business would sell for, to what profile, how we would reach that profile, and an estimated cost and time frame. WE BELIEVE THIS WILL PRODUCE THE MOST ACCURATE VALUATION ESTIMATE POSSIBLE AND IS WHAT THE LAW REQUIRES.

Our primary Service is Business Valuation

The International Business Brokers Association claims they sell only 10% to 20% to 30% of businesses listed for sale. Link here
They charge fees of 10% to 15% plus retainers and generally monthly fees.

If you were going to sell, why would you waste time and money with the people who admit they only sell 10% to 30% of the businesses they list for sale.

Call now for Free Consultation!

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(604) 998-2270
eric@pin.ca