July 9

Expert Analysis: Valuation of a Home Renovation Business

We were hired to prepare an independent valuation report for a residential renovation company based in Alberta. The purpose of this valuation was to determine the fair market value of the business for a potential purchase. This case study provides an overview of the valuation process, key findings, and conclusions.

Business Overview

The subject of the valuation was a residential renovation company. This home reno business offered various services, including repair, improvement, and renovation of homes. Established over 15 years ago, the company serves homeowners, homebuilders, and property managers in Calgary and the surrounding area.

In the fiscal year ending September 30, 2020, the company recorded revenues of $1.6 million, a decrease from $2.9 million in the previous year. The gross profit margin improved to 24% in 2020 from 12% in 2019, despite the revenue decline. The company’s EBITDA also increased significantly from $37,000 in 2019 to $181,000 in 2020, reflecting better cost management and operational efficiency.

Industry and Economic Context

The valuation was conducted in a challenging economic environment. The Alberta economy, heavily reliant on the oil sector, was already under strain before the COVID-19 pandemic, which further exacerbated the economic downturn. In 2020, Alberta’s economy was expected to shrink by 8.7%, with high unemployment rates and reduced housing starts, impacting the overall business climate.

Valuation Approaches

Three primary approaches were considered in the valuation: the income approach, the market approach, and the asset approach.

1. Income Approach: The capitalization of discretionary after-tax cash flow method was used. This involved estimating the future cash flows of the business and discounting them to their present value using the Weighted Average Cost of Capital (WACC), calculated at 30.53%. The income approach indicated an enterprise value ranging from $100,000 to $144,000.

2. Market Approach: This approach used precedent transactions of similar businesses to determine a multiple of EBITDA. The selected comparable transactions yielded an average MVIC/EBITDA multiple of 2.7x. Applying this multiple to the company’s EBITDA resulted in an enterprise value range of $123,000 to $164,000.

3. Asset Approach: This approach considered the net book value of the company’s tangible assets, which amounted to $17,979, and was used primarily as a support for the valuation conclusions from the other methods.

Key Findings

The analysis revealed significant differences between the high and low scenarios, largely due to the economic uncertainties and the impact of the pandemic. The income and market approaches provided overlapping value ranges, reinforcing the reliability of the findings. The final valuation concluded an enterprise value ranging from $123,000 to $145,000, with an equity value of $0 after accounting for the company’s liabilities.


The valuation of this residential renovation business illustrates the complexities involved in valuing companies in volatile economic environments. The thorough application of multiple valuation methods ensured a robust analysis, providing potential buyers and stakeholders with a clear understanding of the business’s value. This case study underscores the importance of considering various approaches and economic factors in the valuation process, particularly in industries heavily affected by external economic conditions.

If you are a business owner, accountant, or lawyer seeking a detailed and independent valuation for your company, now is the time to act. Understanding the true value of your business can provide crucial insights for strategic planning, potential sales, or investment opportunities. Contact Troy Valuations today to schedule a consultation and ensure your business decisions are grounded in accurate and comprehensive financial analysis.


business value, Fair Market Value, Troy Valuations

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