Do you know what your business is really worth?

Benefits of valuing your enterprise now

What’s your business worth? Unfortunately, business owners often have a lack of understanding as to their business’ actual value. Running a business daily with all that it entails, the business valuation aspect is overlooked until it is desperately needed. There are several reasons why business valuation services may be required.

If you are buying or selling, you will need to determine a business’ value before entering negotiations to ensure you are paying a fair price or getting a reasonable price.

Business owners must understand how their organisations will be valued and analyse what areas need improvement. Then, changes to improve valuation outcomes can be made in advance of the sale, with resultant better cash flow and profits.

When is a business valuation required?

There are many reasons why you may need a business valuation in Australia. These include:

Selling an enterprise (preparing for sale)

Buying an enterprise (due diligence to assist in working out a ‘fair price’)

Partnership Dissolution

Shareholder buyout

Family Law matters

Capital Gains Tax*

Improvement and planning

Succession planning

Restructuring and stamp duty

Finance from banks

Compulsory Acquisition under the Land Acquisition (Just Terms Compensation) Act 1991

*Ensuring that the ATO’s APES 225 is adhered to if the valuation is ever challenged.

Our approach to business valuation

When we value an enterprise, we value add as part of the process to determine where improvements can be made by outlining and explaining why certain types of businesses are worth more than others.

You could say we are doing a business health check simultaneously, identifying opportunities to increase profitability and its value, which will benefit you in the long run, explained in more detail below.

As business valuers, we have also acted as Expert Witnesses for businesses involved with a compulsory acquisition by government bodies and have provided advice to clients as to whether the value is in line with what was offered before it was accepted. The compulsory acquirers cover our costs (as outlined in the legislation).

For more information on the process, please click here.

Methods Used

There are many methods used to determine the value of a business. The valuation methodologies are usually determined by reference to:

  • The assets held by the entity, or
  • The earnings of the entity, or
  • The revenue stream of the entity, or
  • A combination of the above.

The most common methods are:

Capitalisation of Future Maintainable Earnings Method

Suitable for businesses that have a good history of profitability, are mature, have stable revenue streams and where reasonable certainty of future earnings exists.

Discounted Cash Flow Method

Focuses on businesses with future cash flows that are being purchased (locked in forwarding revenue streams, e.g. innovation or technology businesses).

Net Asset Backing Method

The value of the enterprise is the sum of net tangible assets where there is little or no goodwill (or a return on goodwill is uncertain), used where the breakup value is likely to exceed the going concern position.

Rule of Thumb or Industry Method

Used as the accepted industry or multiplier model consistently reflected in the market, common for franchises and industry sectors with prominent participants.

Cost to Create Method

For new businesses (start-ups), micro-businesses, loss-making or those with no intangible value and limited tangible assets.

How Tribel Accountants can help

Contact us today to arrange a complimentary obligation free consultation to take the first step towards achieving your business goals.

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