Business Valuations

Putting a value on your business

 

 Why get a valuation?

People need business valuations for all sorts of reasons:

  • Selling your business,
  • Buying a business,
  • Matrimonial property settlements,
  • Disputes with a business partner,
  • Litigation support, or
  • Simply requiring additional finance.

Whether you need a full valuation or the less formal indicative valuation, we can help.  

Do we know what we’re doing?

We have the experience and the expertise in valuing all sorts of businesses from:

  • the smaller mum and dad business ,
  • to larger businesses that employ dozens of people or with multiple outlets.

In a previous life, I headed the ‘Franchise Advisors’ division nationally of a major accounting firm and was successful in having my firm appointed to the National Australia Bank’s panel of endorsed franchise valuers.  Valuing franchise outlets for the major banks and the NAB in particular, I’ve valued dozens of businesses in a great variety of industries.

What is the process?

We start off by devoting time to understanding the company’s business, including:

  • its history,
  • how the business operates,
  • the industry that it’s in,
  • the company’s strategic and competitive position within the industry,
  • its prospects and risks, and
  • the historical and forecast operating results.

Determining the appropriate methodology for valuing the business will depend on:

  • the nature of the business;
  • the company’s normalised past, current and forecast performance;
  • the availability and reliability of forecasts; and
  • the company’s current balance sheet (statement of assets and liabilities).?

Valuation methods

There are many methods of valuing a business depending upon your circumstances and the nature of the business being valued. 

  • Asset Based valuations
    • Based on current and historical financial statements, provided that there is no material change in the assets or financial position.
    • Good for asset- rich businesses where the assets generate the profits.
  • Discounted cash flow
    • Based on management’s forecasts and an appropriate risk-adjusted discount rate in order to determine the net present value for the business.
    • Good for businesses with certainty over future trading results but which are not heavily reliant on assets to generate profits, i.e.: service entities or businesses that rely on IP.
  • Earnings
    • Based on future maintainable earnings gleaned from the recent profit and loss accounts and the available forecasts, culled of abnormal and nonrecurring irregularities.
    • Best method for most businesses, especially those experiencing growth.  
  • Price Earnings
    • Reference to observed share market multiples of comparable trading companies.
    • Larger businesses with parallels on the stock market.
  • Liquidation value
    • Based on the worst case fire-sale scenario.
    • Businesses in real trouble or simply those wanting to just shut their doors.
  • Rule of thumb
    • Based on values achieved in multiple previous sales of businesses in particular industries.
    • Good for Newsagents, Insurance brokers, Milk bars, Chemists and the like.
  • A combination of the above when appropriate.

Whether you’re appraising the business itself or valuing all, or a minority interest in, the shares of the business, we can bring skills to the table which have been learned over decades of valuing businesses.

Our valuations are impartial and independent, an important factor in matrimonial disputes.

For more information, call the office on (03) 9585 7555 and ask for Noel or Amanda, oremail us
We’d be happy to sit with you and discuss the process and warn you about the traps along the way.