Five Big Business Valuation Myths

This is the most common myth. The earnings multiplier can be useful to get an overall general value based on the industry, but it doesn’t apply to all businesses within the same industry. For example, your neighbourhood grocery store will not have the same earnings multiplier as the Safeway grocery chain. Other factors of value such as supplier influence or technological superiority will also have an impact on the company’s value compared to its peers in its industry. Further, sometimes outside 3rd parties – such as the CRA, IRS, banks, courts, trustees, and other interested parties – will not accept industry multiples to determine value.