Business Evaluation Using Market Approach

Business Evaluation

Business evaluation can be done using numerous models. Most experienced Business Brokers or Certified Business Intermediaries realize there are various ways to place a monetary value on a business. Just like the residential real estate industry, which may use multiply methodologies to place a monetary value for any given house, Business Brokers have different approaches at arriving at a price for someone’s business.

Many times, these different approaches can produce dissimilar outcomes.

Business Evaluation Models

Business Brokers normally use three business valuation approaches, the Asset Approach, the Income Approach and the Direct Comparison Approach or Market Approach.

Depending on the person’s reason for asking to have a business evaluated, Business Brokers may use a different approach. If the Business Broker can understand the reason for the evaluation, he or she can then best choose which methodology to use.

What if you are getting a divorce? What if your partner wants a buy out? What if you are selling to one of your children, but have two other kids who aren’t interested in running the family business and yet expect the price to fair? What if you are being expropriated from your present location? What if your Bank or Revenu Canada needs a valuation?

At Investiprise, we find that most of the owners of businesses are asking us to provide them with an asking price to sell a business in the current market. We call this the Most Probable Selling Price (MPSP) or we also use the term Broker’s Opinion of Value. Then the Direct Comparison or Market Approach is used. This method is preferred by most Business Brokers, because it is based on information or statistics of other similar businesses previously sold.

The vast majority of businesses sold through Investiprise are Asset Sales. These are sales which include furniture, equipment, inventory, goodwill and sometimes the real estate or immovable.

Once our Business Brokers collect all the business history, data, financials and reason(s) for selling, they are able to recommend and defend a selling price for that business.

Business Evaluation Solutions

If you or someone you know would like to have a free confidential and no obligation consultation and valuation for their business, we invite you to contact our Montreal Business Broker office today. It will be our pleasure to answer your questions and find you the best solution for your unique situation.