15% have never conducted a valuation: PwC survey
TORONTO, May 12 /CNW/ - With the economy picking up and rumblings of more M&A activity on the horizon, Canadian private companies need to have a clearer understanding of the value of their business and a plan to increase its value. Without knowing, they could be missing opportunities to grow their business, says Michael Epstein, a partner with PwC's Private Company Services.
"Growing value begins with an accurate assessment and understanding of your business's current value and then setting a goal for what you want it to be within a certain time frame. If it's done right, it can attract new sources of financing, joint ventures with suppliers or customers as well as finding and keeping key employees," says Epstein. "And ultimately a properly valued company will attract buyers when owners are ready to sell their business."
To create business value, you have to have a solid business strategy supported by an effective operation, Epstein says. A recent Pulse survey of 91 Canadian private companies conducted by PwC found that 36% of business owners said that their future success depends on a combination of their people, management team, value proposition and business strategy as well as their CEO. On the other hand, 63% identified only one area as their primary driver for future success with highest scores going to "our people" at 25%, followed by "value proposition of our product" (21%). Only 6% picked "business strategy" as their key driver for future success.
Improving the value of your company depends primarily on three areas, according to Epstein:
- A strong management team
- A strategic plan to achieve goals and objectives for both the short
- Strong functional business groups that work well together to support
The survey also showed that while 46% of respondents quantified the value of their business during the last year, 15% had never conducted a valuation.
Epstein believes that last year more private company owners may have had valuations done to take advantage of lower business values as a result of the economic downturn, in order to carry out an estate freeze. "If this is the case, it is actually tax motivated as opposed to being driven by the desire to understand current business value with a desire to building upon it." he says. With an improving economy, translating the growth potential of your business into increased value should be a priority to many business owners of privately owned companies, he says.
To read the full article, "You are growing your business but are you growing its value?" visit http://www.pwc.com/ca/private. It is part of the "Let's Talk" series of articles from PwC's Private Company Services (PCS) group which helps business owners think about topical issues and opportunities that can affect their business performance.
To review the survey, "Insights into building value: results of PwC's pulse survey", visit www.pwc.com/ca/private.
About Private Company Services (PCS)
More than 65% of PwC Canada's clients are private companies, ranging from owner-managed family businesses to large, professionally managed businesses. PwC's Private Company Services (PCS) group is a dedicated team of business advisors who help private company owners resolve day-to-day business issues and achieve long-term success. PCS offers the perspective of a third party with professional industry knowledge, business advisory, tax and accounting experience.
For more information about PwC's Private Company Services, please visit www.pwc.com/ca/private.
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