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Fair Market Value
Fair market value is defined as the price, in cash and cash equivalents, at which a business would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties acting at arm’s length and both parties having reasonable knowledge of the relevant facts.
Our valuations have been used to complete assignments such as corporate restructuring with the CRA, fulfilling shareholder agreement requirements, and facilitating familial ownership transitions. Even if you are not currently facing a situation where a valuation is mandatory, knowing the value of what you have built can help you to make educated decisions going forward.
Business Valuation Methods
Robbinex generally utilizes three main approaches to valuations:
Asset Approach
Income/Cash Flow Approach
Market Approach
The asset approach considers the value of all property, equipment, and physical assets required for the business to function.
The income/cash flow approach formulates a value by analyzing the company as a going-concern, this is generally a function of the business’ ability to continue to earn income and return on investment (ROI).
The market approach values the equity of a company based on observations of public and private transactions.
Have you received a valuation on your business before?
Business Valuation Reasons
There Are Many Reasons Why a Business Owner May Require a Business Valuation
Merger or Acquisition
Hiring an independent valuator when you are approached to sell, merge or acquire, enables you to negotiate on a level playing field.
Maintain Confidentiality
Robbinex provides valuations and the services of a business intermediary, protecting your confidentiality by limiting the number of involved parties.
Change in Family Structure
Hiring an organization, like Robbinex, that provides valuations and the services of a business intermediary, protects your confidentiality by limiting the number of involved parties.
Family Business Transition
Does your business have family working in key roles? They may be well-suited to take over when you are ready to move on. A valuation ensures the transition is fair and equitable.
Employee Ownership Transfer
Long standing employees can be strong candidates to take over a business. A valuation will ensure fair compensation in the transaction.
Value for Partnership Agreement
Many partnership agreements require regular valuations. Robbinex can work with your team to carry out this requirement and provide value added services along the way.
Loss of a Shareholder
Loss of a shareholder may trigger a requirement for a business valuation, in order to calculate the basis for inheritance or estate taxes.
Employee Compensation
Some bonus plans are tied to business valuations.
Employee Stock Ownership Plans (ESOPs)
A business valuation may be used to set up an Employee Stock Ownership Plan, and many firms that operate as such perform a valuation annually, to measure milestones, productivity, or establish a price for entry or exit from the ESOP.
Tax and Estate Planning
Certain sophisticated estate planning vehicles such as family trusts, estate freezes, and corporate restricting efforts require business valuations.
Partnership Changes
Adding or buying out a partner usually requires a business valuation.
Baseline for CFO Decisions
An annual valuation will help an owner better understand the value drivers of their business, as well as how an investor or buyer will be likely to perceive the business.
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