Page 12 - GBC summer English 2025

UNDERSTAND THE VALUE OF
YOUR BUSINESS
The next step is understanding the
current value of your business.
When was your last business
valuation completed? The value of
your business may have changed
considerably due to performance
improvements, economic shifts, or
industry growth. Regardless of
who you plan to transition the
business to – family, current
management, third-party manage-
ment or an external buyer – a clear
understanding of the current value
of the business is a key element to
developing a succession plan, tax
planning, and estate strategies (for
instance an estate freeze to family
members).
Despite the significant growth
in interest and demand that has
occurred in the industry, average
capitalization rates have remained
relatively stable. Per RealtyRates’
investor survey, capitalization rates
for golf assets have ranged from
11.1% to 11.9% over the past five
years, equating to net operating
income (“NOI”) multiples of 8.4x –
9.0x, and as of Q4 2024 averaged
11.8% (8.5x NOI).
Although these capitalization
rates and corresponding implied
multiples are a strong starting
point when considering the value
of your asset, there are several
factors that will affect your specific
situation (see aside).
While average multiples have
remained relatively stable, an influx
of capital into the industry from new
entrants realizing the potential of
investments in the golf industry,
including private equity and family
offices, has resulted in transactions
with implied multiples that
significantly exceed industry
averages in recent years. This is
especially true in cases where an
investor views a business as a ‘trophy
asset’, as land and construction costs
to replicate these assets in prime
locations have increased significantly
from pre-pandemic levels.
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Golf Business Canada
Common
Valuation
Considerations
What are the most common
items seen in golf course
transactions that would affect
the valuation of my business?
Deferred Capital
Consideration for potential
capital expenditures required
for continuing operations.
Market Dynamics
Any risks and/or opportunities
posed by local, regional, and
national market factors.
Membership Deposit
Liabilities
The presence of membership
deposits or other related
liabilities can negatively
impact the value of the
business.
Highest and Best Use
Is there an alternative use for
the business or land that is
more valuable than the current
operations.
Each of these factors and
more will affect the value of
your business. GGA Partners
specializes in completing
valuations for golf and
hospitality businesses.
While evaluating the current
condition of your business’ assets,
it is important to understand that
any deferred capital requirements
are likely to be deducted from the
business’ valuation. Given that this
essentially becomes a zero-sum
game, it is recommended that
owners continue to allocate capital
to maintain their assets, ensuring
continued or improved operations,
and eliminating the possibility of a
reduction in valuation.
An updated valuation supports
everything from your business
strategy and estate planning to
financing and investor conver-
sations. A thorough valuation will
ensure a detailed understanding of
the current business’ fair market
value for tax and estate planning,
while identifying potential areas of
risk and opportunity related to
current market conditions and
business operations, which can be
used as the starting point for setting
a forward-looking business plan.
In addition, a valuation can be
used to secure debt financing to
undertake maintenance or growth
capital initiatives and/or early
cash payouts from an estate
planning perspective. Given
current demand, now may be the
best time to consider a valuation of
your business, irrespective of any
potential future business planning
initiatives.
IDENTIFY AND PREPARE
SUCCESSORS
For some businesses, there is a
logical successor to take over the
business, while in other situations,
there are multiple options available
for consideration that align with
the long-term vision for the
business. Typically, the four most
common options for succession are
family members, third-party manage-
ment, a management buyout, or a
third-party buyer. Each of these
potential succession options have
associated pros and cons and can
take on many different meanings.
Some of those considerations are
noted below:
1. Family Succession – The business
is transitioned to a family member(s).
PROS:
•  Legacy – Keeping the business ‘in
the family’ often leads to greater
control over the future state of the
business and adherence to your
long-term vision and therefore
provides you with the greatest
control over the legacy of your
business.