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When it comes to selling your business in Alberta, buyers look beyond financial statements. They assess risk from a broader dataset. The higher the perceived risk, the lower the value multiple. The lower the risk, the more attractive—and valuable—your business becomes.
Adapted from our founder’s published book, What’s Your Business Really Worth?, these are the ten fundamental factors that affect business value in the eyes of buyers.
1. Competition in Your Market
If you operate in a crowded market, expect downward pressure on value. A shoe store in a busy mall with many competitors will command a lower multiple than a company selling a patented product with limited substitutes.
2. Buyer’s Market & Business Simplicity
If the economy is favourable to buyers, you’ll need to price more competitively. That said, some businesses naturally attract more buyers. Car washes, for example, are simple to operate and generate steady cash flow. Seasonal, labour-heavy businesses like roofing, on the other hand, tend to see fewer interested buyers, regardless of economic conditions.
3. Stability of Labour Force
Turnover drives down value. Businesses that rely on scarce or transient labour—like skilled trades or fast-food employees—face higher risk. In contrast, professional firms with well-compensated employees often enjoy greater stability and value.
4. Diversity of Customer Base
Reliance on a few key customers is risky. If 80% of your revenue comes from just 20% of clients, buyers will hesitate. A broad, diversified customer base is much more appealing.
5. Level of Owner Involvement
If your business depends heavily on you, that’s a red flag. Buyers want an operation that can thrive without the owner. The less the business revolves around you, the higher its value.
6. Available Revenue Streams
Diversification matters. Businesses with multiple products, services, or markets are better positioned to withstand downturns than those dependent on a single revenue stream.
7. Age of The Business
Longevity sounds like stability in buyers’ ears. A business with a track record of consistent cash flow, staff and customers is less risky than a startup still proving itself.
8. Profitability Trend
Buyers value steady growth. When selling, a flat or declining profit trend raises red flags, while moderate, consistent growth demonstrates sound management and future potential.
9. Asset vs. Share Sale Structure
In Canada, owners often prefer a share sale to take advantage of the lifetime capital gains exemption. Buyers, however, usually prefer asset purchases to avoid hidden liabilities. Asset sales are generally seen as less risky, and that can increase multiples.
10. Vendor Financing Options
If you’re willing to finance part of the sale, buyers gain confidence. It shows you believe in the business’s future, and banks often see vendor financing as additional equity, making financing even easier.
Ready to Find Out What Your Business is Worth?
Understanding these ten factors is but a simple first step to positioning your business for the best possible outcome. At Alberta Business Exchange, we’ve helped hundreds of Alberta business owners undergo valuation, prepare for sale, and find the right buyer.
Book a confidential consultation today to learn how your business stacks up in Alberta’s marketplace.