Business Valuation
Business Valuation Guide
You may require a business valuation report for the following reason(s):
- buying a business
- selling a Business
- family matters (including divorce and family settlements)
- litigation
- required by the solicitor
- required by the shareholders
- partnership dissolution
- work out capital gain tax component
- work out goodwill
- stamp duty
- business planning
- others
Being a professional business valuer, we feel that each business operates differently; they may belong to the same industry but running it differently. Each business has its own culture, clientele, suppliers and management style. There is no fixed method to value a business: each business has its own merits and benchmark. Several methods, factors need to be considered to value a business.
We may use one or a combination of the following methods or may add a few more methods to appraise a business:
- Based on sales
- Profit based valuation
- Asset based valuation
- Industry Benchmark
- Rule of thumb
- Comparable Sales method
- Capitalization of Future Maintainable Earnings (CFME)
- Calculating a business net worth
- Based on the business’s income or profits and the expected return on investment (ROI)
- Earning multiple
- Calculation of net assets on a going-concern basis.
Besides the above we will consider the factors such as:
- Age of the business
- Product
- IP (intellectual property) /brand, Social Media reviews
- Industry
- Customers (database)
- Suppliers
- Rent & Lease: Outgoings (included Body Corporation, Promotion and advertising expenses), Rates and business operating expenses.
- Staff wages and KPI, Owner wages (drawings) and their participation/hours in the business.
- Staff and Management skills.
- Business Assets i.e. Chattels / Equipment (owned) and worth of Intellectual properties.
- Business set up costs and fixtures.
- Business location, facelift, papulation, traffic, crossing main roads, Parking and distance from the Big Brands Stores / Retailers.
- License (s), Registrations and approvals (included: council, liquor etc.)
- Health and safety compliance.
- Seating Capacity (approved)
- Financials (Section 52), Profit and Loss and Balance Sheet and Cash Flow Projection) and Business Tax returns.
- Whether the Business will be sold as Going concern or GST applicable.
- If a business is a franchise, the franchise code of conduct, franchise agreement terms, renewal and expiry etc., targets and compliance.
Need a business Valuation? Please fill in the attached “Business Information Form” >> >> >>
Email: admin@businessbrokersvictoria.com.au
Need a quote for business valuation? Please fill in the following "Business Information Form"
Business Details
Diving Deeper into Business Valuation: A Comprehensive Overview
Understanding the worth of a business is not merely about numbers; it’s a multifaceted process influenced by various factors, from finances to intangible assets like brand value and intellectual property. Whether you’re an entrepreneur, an investor, or a stakeholder, comprehending the intricacies of business valuation can significantly impact your decisions.
What is a Business Valuation?
A business valuation is a systematic process used to determine the economic value of an entire business or certain aspects of it. While the reasons for conducting a business valuation can be varied – such as buying or selling a business, handling family matters, litigation, or business planning – the essence remains to understand the true worth of the entity.
Processes and Methods in Business Valuation
Understanding Unique Business Characteristics: No two businesses are identical. Even within the same industry, differences arise due to individual cultures, clientele, suppliers, and management styles. Recognizing these unique attributes is the first step.
Choosing the Right Valuation Method: Depending on the business’s nature and the purpose of the valuation, several methods can be employed. Some common ones include:
Sales-Based Valuation: Often used for retail or sales-driven companies.
Profit-Based Valuation: A closer look at the bottom line to determine worth.
Asset-Based Valuation: Calculating value based on tangible and intangible assets.
Industry Benchmark and Rule of Thumb: Using industry standards as a reference.
Comparable Sales Method: Comparing with similar businesses that have been sold recently.
Capitalization of Future Maintainable Earnings (CFME): An approach considering future earnings potential.
Earnings Multiple: Multiplies the earnings before interest and taxes by a specific number.
Net Assets on a Going-Concern Basis: Evaluates the net assets if the business continues operating.
Factor Analysis: Beyond standard methods, several factors play a pivotal role in valuations:
Operational Aspects: Age of the business, product offerings, IP value, and industry norms.
Client and Supplier Relations: The customer database’s size and quality, and the relationship with suppliers.
Infrastructure & Location: Rent, lease agreements, business setup costs, proximity to major brands or stores, and business location’s general appeal.
Financial Health: Assessing financial statements, business tax returns, and cash flow projections.
Regulations & Compliance: Licenses, health and safety standards, seating capacity, and more.
Franchise Considerations: For businesses operating as franchises, factors such as franchise agreements, code of conduct, and compliance are essential.
Conclusion
The realm of business valuation is intricate and dynamic, necessitating a blend of analytical proficiency and market understanding. While figures and calculations provide a foundation, the real essence of a business’s value is unearthed by delving into its operations, relationships, and positioning in the market. As businesses evolve and markets fluctuate, it’s essential to revisit these valuations periodically, ensuring they reflect the most accurate and up-to-date picture of a company’s worth.
