Amanda Tso:
Hello. I'm Amanda Tso, a partner in BDO Canada's Valuations and Modelling practice. I have more than 15 years of experience providing private investment valuations, fairness opinions, and financial modelling services. I've worked with companies of all sizes on valuations for deal pricing, asset management, risk management, litigation, financial reporting, and tax purposes. In this video, I'll discuss why your business needs a valuation and your next steps.
Why does your business need a valuation?
The most common reason for getting a valuation is acquisition, merger, or selling your business. When selling your business, it can help you during the negotiation phase to set a price that is neither too high nor too low. It can help you identify opportunities to increase the value of your business. It gives you insight into how much your business is worth today and also how much the value of your business could increase in the future by looking at ways to grow your business or reduce risk from a buyer's perspective. A valuation can also help with raising capital for strategic acquisitions or expansion. It allows you to present your business to banks or potential investors with an accurate illustration of your company's performance, giving you the ability to take on debt and more capacity for growth.
Some questions a valuation will help answer: What is the financial health of the business? How has it performed over the last 3 to 5 years? How does the business align with current and projected market trends? And are there areas that need investment or upgrades? Valuations can be key to effective tax planning and compliance, providing essential, client specific, objective data on which strategies can be built. Valuations are used for succession planning and can reduce tensions between family members under stress. As part of the process, you will look at financial projections and build a financial model. A financial model can be a powerful decision making tool if developed correctly, helping to refine your strategic plan, budget for new projects, and even run scenarios.
What should business owners do next?
Brush up on market trends. Staying on top of what's happening in your sector is crucial. Determine your goals. What's your next step in the business lifecycle? Is it selling the business or transitioning ownership to a successor? Is it expanding to new markets or making an acquisition? Or is it reinvesting for digital transformation or other growth initiatives? Identifying your objectives from the start can help guide the valuation process. Take a proactive approach - waiting to get a valuation until there's an offer on the table puts you and your business in a reactive position. You risk the possibility of an unfavorable deal. Start the process early so you are taking control of the situation, and it will put you in a better position to reach your goals.
How BDO can help.
The BDO Valuations team provides accurate, credible valuations to Canadian companies across a variety of industries. We work closely with you to understand your business and leverage real-time market data and industry benchmarks in our assessments. Whether your goals are selling the business or expanding in new markets, we can help you identify opportunities and build a strategy.
Thanks for listening, and for more information, visit us at bdo.ca to learn more.