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Business Valuation

How does a business valuation work?

Your Succession Plus Accredited Adviser will undertake a thorough analysis of your business from a buyer’s perspective, identifying gaps that may prevent you from maximising your return.

After an initial fact-finding mission and collating financials, a comprehensive valuation usually takes around two weeks to deliver. Our process has minimal impact on staff during the review so business can continue as usual.

 

What you receive:

  • A comprehensive and clear 65-page report
  • Clarity on how you stack up against industry benchmarks
  • 3-hour workshop to identify business priorities
  • Recommendations on what to address to increase your business value

More than simply a valuation, your 65-page report will highlight unmanaged risk and recommend options to help maximise your business value in the near- and long-term.

If you want to understand how market, income and asset-based valuations work, we’ve prepared the Demystifying Business Valuations Guide. It’s free, so get your copy below to read at a time that suits you.

Get the Guide

Our valuations also identify the risks that reduce value.

In our experience it is unmanaged risk that most often makes a potential buyer walk away. It’s these same risks that probably keep you up at night. The good news is there’s no risk we haven’t seen before and nothing that can’t be resolved with the right step-by-step process.

  • Reliance On Key Personnel
  • Expensive Revenue
  • A Mismatch In Management
  • Underinsurance
  • Un-systematised Work Processes
  • Poor Technology
  • Lack Of Documentation
  • Sick Finances

Read more about the six causes of business devaluation and how to avoid them in our guide here.

Read: how to avoid business devaluation

Getting a valuation to sell or exit?

Many business owners make the mistake of going to market and taking their foot off the accelerator. Our advice is to carry on business as though you were still going to be at the helm in five years. If you’re keen to improve your valuation, our Five-Stage Succession Process can help you target risk areas step-by-step, even if you exit earlier.

BENEFITS

Business Valuation Service Benefits

Easy

Our unique process is designed to provide you with an accurate assessment of your business performance and value, while not significantly affecting your day-to-day operations in the process.

Thorough

We will examine financial aspects of the business as well as quantifying non-financial and operational issues. Planning derived from the valuation is created based on the personal goals of the business owner.

Tailored

We will design a valuation model to accurately assess the business and outline the best way to address key issues including tax planning, risk management, and exit readiness.

Practical

A Succession Plus valuation that meets the requirements of APES 225 can be relied upon for calculating equity for capital gains tax, IP value, and in stakeholder disputes. Note that valuations do not constitute an audit procedure for general business tax purposes.

Frequently Asked Questions on Business Valuation

  • What is a business valuation?

    • A valuation should provide the value of the equity (shares) in your business and is based on a combination of risk and return (profits). Typically, it is calculated based on several years of financial statements and should remove abnormal expenses.

  • How do you value a business?

    • Valuing a business includes an assessment of both risk and return. The risk could be a combination of industry risk, economic risk and risks related directly to the individual business while the return is normally profit or earnings of the business.

  • What business valuation method should I use – EBITDA or NOPAT?

    • NOPAT is what we use in all our reports and valuations. The key is in the name: Net Operating Profit After Tax. ‘Net’ as in after everything is included, while EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) excludes a lot of key items.

  • When should I get a business valuation?

    • A valuation is a good place to start before you make any kind of decision around strategic planning, succession or exit. It may also be needed as a result of a tax restructure a shareholder or partnership dispute or even a legal case including family law and estate planning.

  • Should I get a business valuation before I sell my business?

    • You should always get a valuation before you decide to sell the business. Most business owners are not aware of the actual valuation, thus a business adviser will not be informed to decide what could be done to improve the valuation and achieve a higher selling price.

  • How can I prepare for a business valuation?

    • Preparing a valuation will require at least three years of financial statements and tax returns. It will also require a detailed assessment of the operational aspects of the business which lead to risk this is normally done through an interview with the owners. The valuer may also want to examine other documents relating to the business.

  • What is included in a business valuation?

    • Business valuation should not just be a monetary value ($$), it should also include the key valuation drivers and assessment of the risk. Also, a valuation should ideally provide recommendations and a project plan to improve the value over time.

  • How long does a business valuation take?

    • A proper valuation should take between two and three weeks once all the information is provided, as the analyst will be required to adjust financials to normalise the profit as well as assessing many operational aspects within the business to determine overall risk.

  • What is the difference between a business valuation and a business appraisal?

    • Similarly to Real Estate, a business appraisal is simply an estimate, it cannot be relied upon or used by the ATO or the courts. A valuation, on the other hand, is a formal document prepared by a qualified valuer after detailed analysis and should be far more accurate.

  • What is goodwill?

    • Goodwill is an intangible asset that often makes up a large part of the valuation of a business. It is a combination of business performance, customer relationships, supply contracts, intellectual property (including patents and trademarks), employees and brand or reputation.

  • How do you calculate goodwill in a business?

    • Goodwill is most commonly calculated based on a multiple of profits and should represent the value to an investor or buyer of those profits going forward. This means it needs to factor in the reliability (or risk) of those profits in the future.