Preparing for a business valuation can be an intricate task. Whether you’re preparing for the valuation of a large corporation or a small start-up business, having all the required information ahead of time will work in your favour.
All the documents and information that you gather to give the accountant or business valuer will play a vital role in determining the value of your company.
Getting expert advice on property valuation from a professional valuation company in Brisbane will definitely help you. Chartered Practicing Accountants (CPAs) and business valuers registered with regulatory organisations will give you the best consultations and valuation services.
You can expect nothing but the best services from them because they have decades of experience in the industry. Apart from that, they also comply with national regulations and follow a strict code of conduct and ethics. This is to ensure that every assessment carried out is done impartially and conclusively.
Having said that, let's jump right in and give you all the most important information you'll need for a valuation.
What is needed for a property valuation?
The most important thing needed for a property valuation is the valuer. While the valuation of property is not too demanding, there are still some things that you, the business owner, have to do. One of the most important things you’ll have to do is gather all the financial data that your CPA needs. The financial situation of an organisation is paramount when determining its value and success.
Which documents do I need for a valuation?
There are quite a few documents that will help your valuer complete their assessment of your business. These include the following:
- Business start-up plans and legal documentation
- The lease or deed of your business’ building
- All financial statements and balance sheets
- Reports on income, expenses, assets and liabilities
- Business income and market performance prediction reports
- Tax receipts for the past three to four years
- Any pending lawsuits or active court cases
- Proof of any investments made by or in the business
- An account of all inventory, if applicable
- Loan application or approval documents
All the proper documents and financial reports have to be disclosed. This will help the analyst or accountant compile an accurate and impartial assessment of your business.
What are the different types of property valuation?
Valuers use different valuation methodologies for different types of property. For the valuation of businesses, the approach will be similar. While this is the case, there will still be a few differences. The reason is that the nature of the businesses changes. The following will be taken into account: the market, your business’ income and expenses, and the assets you own.
Here are the three main approaches that are taken to calculate the value of a business:
- The asset-based approach
- The capitalisation of earnings approach
- The discounted cash flow approach
Here’s a little breakdown of each approach that Chartered Practicing Accountants and business valuers can use.
The asset-based approach
When this approach is used, the net value of all your material (inventory or equipment) and non-material (shares and financial investments) assets will be established. The calculation will include all assets, from which all liabilities will be subtracted.
The capitalisation of earnings approach
This approach also determines the current value of a business according to its potential future earnings. The forecast of future earnings is based on how much revenue the company has generated and can continue to generate.
The discounted cash flow approach
This approach examines a company's expected cash flow. It is a great approach for larger companies that can measure their financial operations against current market trends. The future predictions for income will be used to determine the current market value of your business.
When is a good time to get a property valuation?
There is no right or wrong time to have your property valued. Here are a few instances in which it would be a great idea to have a valuation done:
- When you simply want to know the monetary value of your company
- Close to the tax season so that you know how much taxes you need to pay
- Before selling or restructuring your business’s management
- Prior to giving or selling shares in your company to others
- When doing your research before buying or investing in a business
- For legal disputes in the case of inheritance or divorce settlements
- When needing security for a loan that your business is in need of
- Before taking out a suitable insurance policy or when reviewing an existing one
What is the most important part of a valuation?
All parts of the valuation process are equally important. From the company you choose to your preparation for your property’s assessment, they all play a crucial role in determining the worth of your assets.
Choosing a reliable company and having the opportunity to have a senior independent valuer assess your assets is important for getting a high-quality report that you can rely on. Your readiness for the analysis can affect its outcome too.
How to prepare for a business valuation
Are you unsure of what to do before your business is assessed? Here are a few easy steps to follow that can help you prepare the valuation of your business.
- Step 1: Determine why you want to make use of a valuation service.
- Step 2: Consult a professional chartered accountant or valuation company.
- Step 3: Decide on which aspects of your business you want to be valued.
- Step 4: Gather all relevant documents and important financial reports.
Your preparation for the assessment of your property is as important as the assessment itself. Failing to disclose any information may compromise its outcome. All financial reports need to be presented so that you can get an accurate calculation of how much your company is worth.
In Conclusion
Although CPAs and experienced business valuers have a wealth of experience and knowledge on how to value different kinds of businesses, they still have to be supplied with the correct documentation and information. This will ensure that you get the most accurate report on the monetary value of your property or assets.
There are a number of approaches that can be used to determine the value of a business. CPAs and business valuers have the knowledge to decide which approach would be best suited for yours. There are also instances in which a combination of two or more methods can be used.
Get in touch with our professionals at Business Valuation Brisbane if you are in need of a property valuation service. Feel free to contact us by phone or by completing a contact form on our website.