Overview – AB VALUATIONS INC.

business valuation

Business valuation is the process of determining the economic value of a business, considering factors like past performance, future earnings, assets, liabilities, and market conditions. It’s crucial for various purposes, including sales, acquisitions, mergers, taxation, and estate planning. Several methods exist to conduct a business valuation, with common approaches including earnings valuations, market valuations, and asset-based valuations.

Methods of Business Valuation:

Earning Valuations
This method assesses a business’s value based on its potential for future earnings, often using techniques like capitalization of earnings, capitalization of cash flows, discounted cash flows etc.

Market Valuations

This approach compares the business to similar businesses that have recently sold, taking into account factors like size, industry, and location.

Asset-Based Valuations
This method calculates the net value by subtracting liabilities from assets. It’s often used for businesses being liquidated rather than healthy, ongoing operations.

Factors influencing Valuation:

Financial Performance
Historical and projected earnings, revenue, and profit margins are key indicators.

Assets and Liabilities

The tangible and intangible assets of the business, as well as its outstanding debts, are considered.

Market Conditions

The overall economic climate and demand for businesses in a similar industry can impact valuation.

Industry Specifics

Certain industries may have standard valuation multiples or methodologies that are commonly applied.

Who Performs Valuations?

While business owners can perform their own initial assessments, professional valuators, including Chartered Business Valuators (CBVs) in Canada, are often engaged for their expertise in providing objective and comprehensive valuations.